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Income Investing: Ideas to Beat the BankSM

In an ever-changing interest rate environment, keeping tabs on the numerous corners of the yield market can be difficult for investors. To help investors stay informed, we offer monthly insights on income investing, covering the latest news, trends and investment opportunities.

July 2020*
Authored by: Michael Cohick, Director, ETF Product

U.S. treasuries traded flat for June, with yields remaining near record lows, while most other categories saw declining yields during the month as spreads narrowed. These declines were mild compared to previous months as signs of an increase in COVID-19 cases in various parts of the country renewed fears of another outbreak. Uncertainty around the pandemic, November elections, and U.S.-China relations may weigh on markets in the coming months, and we believe continued fiscal and monetary support are expected. Investors seeking income may need to get creative with their portfolios as the low yield environment persists.

One area of the income market we like right now are municipal bonds. We believe they are a good and consistent source of income with tax advantages. While this corner of the market experienced significant outflows during the months of March and April, it has, and continues to recover in terms of performance and fund inflows. However, when we look at flows into different segments of munis, they seem to indicate that investors remain cautious of lower rated muni credits. One way they can find comparable yields without a significant allocation to non-investment grade bonds is through closed-end funds (CEFs). VanEck Vectors® CEF Municipal Income ETF (XMPT) offers a portfolio of muni CEFs. As of July 16, the Fund’s 30-day SEC yield was 4.12%. For investors in the highest Federal tax bracket, that is 6.54% on a taxable equivalent basis. This attractive yield is derived from a portfolio of muni CEFs that is over 80% investment grade. Thanks to the closed structure, the underlying CEF managers can effectively employ leverage to boost yield. With borrowing costs historically low and unlikely to rise in the foreseeable future, we view this strategy as an attractive opportunity.

VanEck Vectors Income ETFs

Ticker Fund Name 30 Day SEC Yield (%)3 Duration (Yrs) Gross Expense Net Expense
Municipal Income
ITM AMT-Free Intermediate Municipal Index ETF 1.16 5.811 0.24 0.24
MLN AMT-Free Long Municipal Index ETF 2.10 6.841 0.24 0.24
SMB AMT-Free Short Municipal Index ETF 0.60 3.061 0.20 0.20
XMPT CEF Municipal Income ETF 4.23 -- 1.86 1.86
HYD High-Yield Municipal Index ETF 4.31 7.211 0.35 0.35
MAAX Municipal Allocation ETF 3.16 6.561 0.38 0.38
SHYD Short High-Yield Municipal Index ETF 3.16 4.391 0.35 0.35
Corporate Bond
ANGL Fallen Angel High Yield Bond ETF 5.42 6.262 0.45 0.35
FLTR Investment Grade Floating Rate ETF 1.48 0.052 0.40 0.14
Equity Income
BIZD BDC Income ETF 13.87 -- 9.68 9.62
EINC Energy Income ETF 9.10 -- 0.45 0.45
DURA Morningstar Durable Dividend ETF 4.27 -- 1.14 0.29
MORT Mortgage REIT Income ETF 15.61 -- 0.49 0.42
PFXF Preferred Securities ex Financials ETF 6.09 -- 0.46 0.41
International Bond
CBON ChinaAMC China Bond ETF 2.28 2.532 2.25 0.50
EMAG Emerging Markets Aggregate Bond ETF 3.65 5.482 0.92 0.35
HYEM Emerging Markets High Yield Bond ETF 6.84 3.652 0.46 0.40
GRNB Green Bond ETF 1.75 5.142 1.02 0.20
IHY International High Yield Bond ETF 5.55 3.832 0.54 0.40
EMLC J.P. Morgan EM Local Currency Bond ETF 4.45 5.222 0.41 0.30
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Source: VanEck (as of 06/30/20).
1Duration to Worst. 2Effective Duration. 330-Day SEC Yield is calculated daily, and is a standard yield calculation developed by the Securities and Exchange Commission that allows for fairer comparisons primarily among bond funds. It is based on the most recent 30-day period. This yield figure reflects the interest earned during the period after deducting the Fund's expenses for the period. It does not reflect the yield an investor would have received if they had held the Fund over the last 12 months assuming the most recent NAV. In the absence of temporary expense waivers or reimbursements, the 30-Day SEC Yields on 06/30/20 would have been as follows - XMPT: 4.23%MAAX: 3.16%ANGL: 5.35%FLTR: 1.23%BIZD: 13.80%DURA: 3.93%MORT: 15.52%PFXF: 6.05%CBON: 0.26%EMAG: 2.77%HYEM: 6.78%GRNB: 1.24%IHY: 5.38%EMLC: 4.44%. Expenses for VanEck Vectors Equity and Income ETFs are contractually capped. Expense caps exclude acquired fund fees and expenses, interest expense, trading expenses, taxes and extraordinary expenses. Expense Caps: XMPT: 0.40%MAAX: 0.08%ANGL: 0.35%FLTR: 0.14%BIZD: 0.40%DURA: 0.29%MORT: 0.40%PFXF: 0.40%CBON: 0.50%EMAG: 0.35%HYEM: 0.40%GRNB: 0.20%IHY: 0.40%EMLC: 0.30%. Expenses for VanEck Vectors Municipal ETFs are unitary fees. Van Eck Associates Corporation (the “Adviser”) will pay all expenses of these Funds, except for the fee payment under the investment management agreement, acquired fund fees and expenses, interest expense, offering costs, trading expenses, taxes and extraordinary expenses. Expense ratios are as of the most recent prospectus. Past performance is no guarantee of future results. Please see the prospectus of each fund for more detailed information on expenses.

Morningstar ETF Category Flows

Estimated Net Flow ($M)
Morningstar Category Name 1-Mo QTD YTD 1-Yr
Short-Term Bond 4,964 13,418 10,975 16,811
High Yield Bond 1,636 15,648 13,132 21,391
Long Government 1,330 2,791 1,208 4,261
Muni National Interm 1,268 2,894 3,305 7,741
Emerging Markets Bond 776 1,059 -705 -213
Intermediate Government 663 345 3,126 15,102
Long-Term Bond 509 523 223 2,050
Muni National Long 507 200 433 753
Muni National Short 398 926 1,148 1,814
High Yield Muni 106 -167 -212 418
World Bond -90 -47 -286 -610
Bank Loan -156 -161 -2,780 -903
Short Government -441 1,650 10,606 10,823
Ultrashort Bond -699 1,590 10,376 12,844
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Source: Morningstar (as of 06/30/20). Not representative of fund or fund indices.

Investment Category Yields

Yield to Worst (%)
Category 06/30/20 05/31/20 06/30/19
EM USD High Yield Aggregate 8.37 9.26 7.24
U.S. High Yield Corporates 6.85 7.11 6.05
Global High Yield Corporates 6.67 7.14 5.69
EM USD Sovereigns 5.52 5.92 5.55
High Yield Municipals 4.89 5.33 4.41
EM USD High Yield + Investment Grade Corporates 4.68 5.32 4.70
EM Local Currency Sovereigns 4.51 4.54 5.69
Preferred Securities 3.52 2.23 2.14
U.S. Corporates 2.15 2.40 3.16
Municipals 1.50 1.61 2.02
U.S. Aggregate 1.25 1.34 2.49
Global Aggregate 0.95 1.01 1.48
Treasury Inflation Protected Securities 0.72 0.74 2.11
10 Year Treasuries 0.65 0.65 2.00
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FactSet (as of dates indicated). See bottom of page for Index names. Not representative of fund or fund indices. Please see standard performance for these categories below. Past performance is no guarantee of future results.

U.S. Yield Curves

Treasury Yield Curve

Muncipal AAA Yield Curve

Source: Bloomberg (as of 06/30/20).

Global 10-Year Sovereign Yields (%)

Source: FactSet and Bloomberg (as of 06/30/20). Based on local currency prices. Past performance is no guarantee of future results.

Investment Category Total Returns (%)

Month-End 06/30/2020 Quarter-End 06/30/2020
Investment Category 1 MO* YTD* 1 YR 3 YR 5 YR
U.S. Aggregate 0.63 6.14 8.67 5.31 4.29
U.S. High Yield Corporates 0.97 -4.78 -1.09 2.93 4.56
Global High Yield Corporates 1.87 -4.22 -0.58 2.95 4.61
EM USD High Yield Aggregate 4.22 -5.56 -4.28 1.22 4.99
EM USD High Yield + Investment Grade Corporates 2.58 0.11 4.09 4.60 5.28
EM Local Currency Sovereigns 0.47 -6.89 -2.80 1.13 2.33
EM USD Sovereigns 3.51 -2.76 0.49 3.59 5.28
U.S. Corporates 1.96 5.02 9.43 6.32 5.81
U.S. REITs 4.89 2.68 6.51 5.59 5.15
Global Aggregate 0.89 2.98 4.19 3.78 3.54
Treasury Inflation Protected Securities 1.12 6.01 8.21 5.03 3.73
Municipals 0.82 2.08 4.41 4.21 3.92
High Yield Municipals 3.96 -2.64 1.01 5.26 5.75
10 Year Treasuries -0.01 12.68 14.10 7.03 4.85
Preferred Securities -1.01 -1.89 2.70 3.84 5.62
U.S. Dividend Stocks -1.14 -21.68 -15.04 -0.44 5.41
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VanEck Vectors Income ETF Total Returns (%)

Month-End 06/30/20 Quarter-End 06/30/20
Ticker Fund Name 1 MO* YTD* 1 YR 3 YR 5 YR LIFE Commenced
Municipal Income
HYD High-Yield Municipal Index ETF 2.95 -5.82 -3.32 2.70 3.82 6.65 02/04/09
ITM AMT-Free Intermediate Municipal Index ETF 0.65 2.79 4.71 4.49 4.23 4.45 12/04/07
MAAX Municipal Allocation ETF 1.64 -3.96 -1.63 -- -- -0.54 05/15/19
MLN AMT-Free Long Municipal Index ETF 1.28 2.47 4.92 5.13 4.97 4.32 01/02/08
SHYD Short High-Yield Municipal Index ETF 2.81 -2.70 -0.69 2.78 2.28 2.53 01/13/14
SMB AMT-Free Short Municipal Index ETF 0.37 2.07 3.14 2.40 1.92 2.37 02/22/08
XMPT CEF Municipal Income ETF 1.62 -3.08 1.39 3.59 5.68 5.74 07/12/11
Corporate Bond
ANGL Fallen Angel High Yield Bond ETF 3.17 -0.97 3.52 4.44 6.85 7.67 04/10/12
FLTR Investment Grade Floating Rate ETF 1.06 0.16 1.85 2.41 2.11 1.53 04/25/11
Equity Income
BIZD BDC Income ETF 0.07 -23.13 -19.14 -4.04 1.60 1.59 02/11/13
DURA Morningstar Durable Dividend ETF -1.44 -11.55 -4.71 -- -- 3.86 10/30/18
EINC Energy Income ETF -2.56 -29.22 -30.90 -11.78 -16.85 -14.24 03/12/12
MORT Mortgage REIT Income ETF 14.32 -40.13 -36.08 -11.33 -1.28 2.60 08/16/11
PFXF Preferred Securities ex Financials ETF -2.37 -7.49 -2.94 2.25 3.79 4.55 07/16/12
International Bond
CBON ChinaAMC China Bond ETF 1.01 0.91 1.41 2.74 0.85 0.97 11/10/14
EMAG Emerging Markets Aggregate Bond ETF 1.77 -3.04 0.51 2.80 3.57 2.50 05/11/11
EMLC J.P. Morgan EM Local Currency Bond ETF 0.82 -6.57 -5.51 -0.70 0.96 0.40 07/22/10
GRNB Green Bond ETF 1.30 5.15 4.76 3.37 -- 4.76 03/03/17
HYEM Emerging Markets High Yield Bond ETF 3.57 -2.44 0.14 2.76 4.60 4.83 05/08/12
IHY International High Yield Bond ETF 2.59 -3.15 0.17 2.78 4.24 4.62 04/02/12
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Month-End 06/30/20 Quarter-End 06/30/20
Ticker Fund Name 1 MO* YTD* 1 YR 3 YR 5 YR LIFE Commenced
Municipal Income
HYD High-Yield Municipal Index ETF 2.98 -5.43 -3.08 2.91 4.27 6.68 02/04/09
ITM AMT-Free Intermediate Municipal Index ETF 0.70 2.66 4.78 4.49 4.23 4.45 12/04/07
MAAX Municipal Allocation ETF 1.59 -3.95 -1.47 -- -- -0.47 05/15/19
MLN AMT-Free Long Municipal Index ETF 1.33 2.12 4.76 5.15 5.07 4.30 01/02/08
SHYD Short High-Yield Municipal Index ETF 3.47 -3.93 -1.72 2.57 2.16 2.38 01/13/14
SMB AMT-Free Short Municipal Index ETF 0.42 1.99 3.38 2.53 2.08 2.38 02/22/08
XMPT CEF Municipal Income ETF 2.11 -2.80 1.51 3.72 5.75 5.78 07/12/11
Corporate Bond
ANGL Fallen Angel High Yield Bond ETF 2.31 -1.33 3.24 4.46 6.83 7.69 04/10/12
FLTR Investment Grade Floating Rate ETF 0.95 0.03 1.93 2.32 2.15 1.53 04/25/11
Equity Income
BIZD BDC Income ETF 1.00 -22.91 -18.67 -3.89 1.63 1.67 02/11/13
DURA Morningstar Durable Dividend ETF -1.45 -11.49 -4.66 -- -- 3.92 10/30/18
EINC Energy Income ETF -2.08 -28.33 -30.46 -11.58 -16.74 -14.20 03/12/12
MORT Mortgage REIT Income ETF 14.26 -39.97 -35.83 -11.17 -1.27 2.61 08/16/11
PFXF Preferred Securities ex Financials ETF -1.43 -7.35 -2.72 2.34 3.76 4.61 07/16/12
International Bond
CBON ChinaAMC China Bond ETF 0.91 2.26 2.11 3.35 0.94 1.11 11/10/14
EMAG Emerging Markets Aggregate Bond ETF 3.01 -3.88 -0.41 2.71 3.66 2.44 05/11/11
EMLC J.P. Morgan EM Local Currency Bond ETF 0.13 -7.08 -5.98 -0.89 0.93 0.35 07/22/10
GRNB Green Bond ETF 0.95 5.22 4.98 3.34 -- 4.85 03/03/17
HYEM Emerging Markets High Yield Bond ETF 2.20 -3.04 -0.66 2.81 4.72 4.83 05/08/12
IHY International High Yield Bond ETF 2.88 -2.99 0.30 2.85 4.20 4.65 04/02/12
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