Municipal Bond ETF Model ETF Portfolio Rebalance Q4 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 9/18/2019 unless noted: (1) 9/17/2019, (2) 7/31/2019.
Rebalancing objective: Generate incremental yield over market “beta” while maintaining duration risk exposure.
- Maintaining stance on zero allocation to overpriced short term investment grade municipal bond market by as we enter Q4 2019.
- Reducing exposure to investment grade munis in general by dropping allocation in VTEB down to 30% from 40% in Q3 2019.
- Maintaining exposure in SHYD for short term high yield municipal at 35% for Q4 2019 taking advantage of incremental yields.
- Increasing exposure in HYD for high yield municipal bonds from 25% in Q3 2019 to 35% for Q4 2019 extending both duration and credit risk in return for incrementally higher yields.
- Staying as liquid as possible by using larger ETFs and that have options available on the ETF where possible and staying 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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