Rieger Report Muni ETF Model Q1 2019 Rebalancing

Posted on by riegerreport

Municipal Bond ETF Model Portfolio Rebalance for Q1 2019

RiegerReport_Rebalance_122718

Sources: VanEck Vector Funds , iShares by BlackRock, and The Vanguard Group. Table is provided for illustrative purposes only. Past performance is not a guarantee of future results. TEY = Taxable Equivalent Yield calculated at an assumed 37% tax rate. Data as of 1 is 12/24/2018, 2 is 12/26/2018, 3 is 11/30/2018.

Rebalancing objective: Generate incremental yield over market “beta” while maintaining duration risk exposure

  • Keep overall duration at or about 5.5 years while generating above market yields
  • Despite low projected 2019 new issuance keep an eye out for underlying rates steepening
  • Munis remain “risk off” asset class as potential risk aversion asset class during periods of equity volatility
  • Take advantage of incremental yields of short term high yield municipal bonds
  • Stay as liquid as possible using larger ETFs and that have options available on the ETF where possible
  • Stay efficient by keeping management fees as low as possible

Notes:

  • Taxable Equivalent Yield = Tax Exempt Yield / (1 – Federal Tax Rate)
  • Taxable Equivalent Yield calculation is not perfect: for example, the municipal high yield sector has exposure to bonds subject to AMT and that is not included in the calculation.
  • 2018 tax brackets, however not all tax brackets are represented herein
  • End of day yields are used

Analyst Disclosure:

  • JR Rieger and or the Rieger Report LLC has not received compensation either directly or indirectly from the sponsor(s) of the ETF(s) included in this report.
  • At the time of this writing, JR Rieger does not own the ETF(s) cited in this report.
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Rebalance for Q1 2019