## [# High Yield Bonds For High Yield Munis](/sections/news/high-yield-bonds-high-yield-munis)
# High Yield Bonds For High Yield Munis
Why a tax-swap out of corporate into muni could make sense right now.
[](/contributors/patrick-luby)
[By Patrick Luby](/contributors/patrick-luby)
Mar 04, 2016
Edited by: Patrick Luby
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While many investors most often think of [tax-loss swaps](https://www.etf.com/sections/features-and-news/3-things-know-about-tax-loss-harvesting?nopaging=1) as a year-end strategy, now may be a good time to review your portfolio for opportunities to harvest tax losses.
This can be particularly timely for investors with allocations to high-yield corporate bonds who may be disappointed by recent negative returns and who were also surprised by the higher-than-expected correlations with their equity positions. (Of course, some investors without exposure to high-yield corporate bonds are currently thinking about getting in, suggesting that now could indeed be a good time to think about harvesting losses.)
Investors who want to reduce the equity correlation of their fixed-income allocation and are comfortable maintaining their exposure to noninvestment-grade credit risk may want to consider swapping from high-yield corporate bonds into high-yield municipal bond ETFs.
**Different Risks & Performance**
While the credit risks in high-yield municipal bonds can be much different from traditional investment-grade public-purpose municipal financings, the recent performance of the high-yield muni sector has been much different from high-yield corporates, as shown by the indexes below.
Select Market Indexes Total Returns
*As of 3/1/16* [Duration](https://www.etf.com/sections/features-and-news/duration-guide-muni-etfs?nopaging=1)YTD1-Year[S&P 500 (SPX)](https://us.spindices.com/indices/equity/sp-500)N/A-3.21%-5.99%[S&P U.S. High Yield Corporate Bond Index (SPFICHYT)](https://us.spindices.com/indices/fixed-income/sp-us-high-yield-corporate-bond-index)4.40-0.25%-6.05%[S&P National AMT-Free Municipal Bond Index (SPMUNUST)](https://us.spindices.com/indices/fixed-income/sp-national-amt-free-municipal-bond-index)4.650.95%3.56%[S&P Municipal Yield Index (SPMUHT)](https://www.spindices.com/indices/fixed-income/sp-municipal-yield-index)6.331.19%3.96%*Source: [S&P Dow Jones Indices](https://www.spindices.com/)*
If you are going to consider a tax-loss swap, be sure to consult in advance with your tax advisor for guidance on how the IRS regulations will apply to your specific situation.
Because of the need to avoid a “[wash sale](https://www.irs.gov/publications/p550/ch04.html#en_US_2015_publink100010601 ""Wash Sales," IRS Publication 550")” when doing a tax-loss swap, investors in individual securities may find it easier to use ETFs to avoid buying “[substantially identical](https://www.irs.gov/publications/p550/ch04.html#en_US_2015_publink100010601 ""Wash Sales," IRS Publication 550")” securities.
You can use [ETF.com’s ETF Screener](https://www.etf.com/etfanalytics/etf-finder) to identify potential replacements. (By leaving the “Category” drop-down on “All Categories” and selecting “High Yield” in the Focus menu, you will get a list of ETFs that will include corporate and municipal high yield.)
There are currently three high-yield municipal bond ETFs, which are highlighted below. Also included on the list is the [Market Vectors CEF Municipal Income (XMPT)](https://www.etf.com/XMPT), which, instead of taking on noninvestment-grade credit risk, takes on the heightened interest-rate risk inherent in the underlying leveraged municipal bond closed-end funds.
**Higher Risk Than Other Munis**
Keep in mind, though, all of these funds have more risk than traditional municipal bond ETFs and should be expected to be more volatile. In most cases, exposure to high yield should only be for a portion of the overall fixed-income exposure.
When evaluating these as swap candidates versus existing holdings in corporate high-yield ETFs, be sure to compare the average credit quality of both funds, and also the interest-rate risk as measured by the duration. (Both of which are shown on the ETF Screener/Fundamentals tab.)
TickerFund[Duration](https://www.etf.com/sections/features-and-news/duration-guide-muni-etfs?nopaging=1)Weighted Credit Quality1-Year Total Return
(Based on NAV)Dividend Yield
Prior 12 months income to share priceYTM[SHYD](https://www.etf.com/SHYD)[Market Vectors Short High Yield Municipal Index](https://www.etf.com/SHYD)3.65BB-0.45%2.94%4.17%[HYMB](https://www.etf.com/HYMB)[SPDR Nuveen S&P High Yield Municipal Bond](https://www.etf.com/HYMB)7.84B+2.78%4.15%5.05%[HYD](https://www.etf.com/HYD)[Market Vectors High Yield Municipal](https://www.etf.com/HYD)8.3B+4.02%4.35%9.34%[XMPT](https://www.etf.com/XMPT)[Market Vectors CEF Municipal Income](https://www.etf.com/XMPT)N/AN/A8.13%4.68%N/A*ETF data as of March 1, 2016, based on FactSet data from ETF.com*
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*Patrick Luby is the author of [www.IncomeInvestorPerspectives.com](https://www.incomeinvestorperspectives.com/) and has decades of experience in helping advisors and investors understand the municipal bond market. At the time this article was written, the author did not have any positions in the securities mentioned. This is not a recommendation to buy, sell or hold any of the securities mentioned. Luby does not provide investment, tax, legal or accounting advice. Investors should consult with their own advisor and fully understand their own situation when considering changes to their strategy, tactics or individual investments.*
[ Patrick Luby ](/contributors/patrick-luby)
Patrick Luby is the municipal strategist with CreditSights Wealth and has decades of experience in the municipal bond market. [View Bio](/contributors/patrick-luby)
Related Topics [Muni](http://www.etf.com/topics/muni-etfs)
[Junk Bond](http://www.etf.com/topics/junk-bond)
[Fixed Income](http://www.etf.com/topics/fixed-income)