Government bonds have historically been sources of low-risk, reliable income for investors.
However, since the COVID-19 pandemic, the yields of government bonds have not been favorable, and rising interest rates have made those yields all the more unattractive. Yet, 2023 looks to be the year bonds make a comeback.
Bond yields have been on the rise and are likely to remain high through the first half of 2023. With these favorable conditions, it makes sense to explore opportunities presented by bonds.
One potential avenue into this market is the VanEck Long Muni ETF (MLN). This fund is managed by Van Eck Associates Corporation, and seeks to replicate the price and yield performance of the ICE Long AMT-Free Broad National Municipal Index (MBNL) as closely as possible.
MLN focuses exclusively on U.S. alternative minimum tax (AMT)-free, long-dated municipal bonds, while still trying to capture a full range of issuers and market sectors. The fund weights constituents by market value and mainly includes investment grade bonds with high overall credit quality.
Normally, the fund invests about 80% of its total assets in fixed income securities. The fund uses a sampling method in tracking the index, meaning that it will invest in a sample of securities that collectively have an investment profile similar to that of the underlying index.
In spite of its specifications, the fund boasts a diverse portfolio, with top holdings including bonds of The New Jersey State Turnpike Authority, The Massachusetts Development Finance Agency, the Kentucky Bond Development Corp and the State Of Illinois. Its investment pool is also attractive for specializing in areas that will always have a good degree of security.
Chart courtesy of StockCharts.com.
As of Feb. 7, MLN’s total returns have been at 2.81% for the past month, compared to 11.71% in the past three months and 3.76% year to date (YTD).
As with any investment, it’s important to consider one’s individual financial situation and goals carefully. Investors are always encouraged to do their due diligence before adding any stock or exchange-traded fund (ETF) to their portfolio.
As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.
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