Municipal Bond ETF Model Portfolio Rebalance for Q2 2019
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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 3/15/2019 unless noted: 13/14/2019, 22/28/2019.
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
- Reducing exposure in overpriced short term investment grade muni market and taking gains in the richly priced national muni market. Result will be to take advantage of munis appearing rich v. other asset classes and allocate more toward high yield muni bonds on the shorter end the curve by increasing from 20% to a 30% allocation in 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
- 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.
- 2019 tax brackets, however not all tax brackets are represented herein
- End of day yields are used
- 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
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