Short Duration Muni ETFs Offer Shelter

How should muni ETF investors be reacting to the post-election bond market volatility?

Reviewed by: Patrick Luby
Edited by: Patrick Luby

Bond market yields have moved sharply higher—pushing prices lower, and of course, the longer the duration, the bigger the move.

Ordinarily, dramatic yield shifts such as this are caused by changes in the economic environment. In this case, however, it is the increase in uncertainty arising from the election of Donald Trump.

Investors who need to put money to work in municipal bonds and who are anxious about taking on too much interest rate risk, may wish to consider an interim position in short-duration ETFs such as the iShares iBonds Sep 2017 Term Muni Bond ETF (IBMF), iShares Short Maturity Municipal Bond ETF (MEAR), PIMCO Short Term Municipal Bond Active ETF (SMMU) or the VanEck Vectors Pre-Refunded Municipal Index ETF (PRB).

Another fund to consider is the PowerShares VRDO Tax-Free Weekly Portfolio (PVI) (which invests in municipal variable rate securities) until the uncertainty recedes.

As the markets settle in, investors could then swap into other positions more in line with their long-term goals. (For additional guidance on selecting muni ETFs, see How To Pick The Right Muni ETF and Duration As A Guide With Muni ETFs.)

Select Bond Market Benchmark Yields


Sources: UST—U.S. Treasury Yield Curve Rates from U.S. Treasury Department. Muni Yields from the AP Municipal Benchmark Curve, powered by MBIS.


Here, sorted by duration, are the muni ETFs with durations lower than 3.0:

TickerFundNicheAUM (millions)Dividend YieldDuration
PVIPowerShares VRDO Tax-Free Weekly PortfolioFloating Rate $59.8 0.07%0.05
IBMFiShares iBonds Sep 2017 Term Muni Bond ETFShort-Term $200.6 0.89%0.85
MEARiShares Short Maturity Municipal Bond ETFShort-Term $35.0 0.80%0.93
IBMGiShares iBonds Sep 2018 Term Muni Bond ETFIntermediate $146.6 0.89%1.79
SUBiShares Short-Term National Muni Bond ETFShort-Term $1,160.0 0.76%1.99
SMMUPIMCO Short Term Municipal Bond Active ETFShort-Term $71.0 0.98%2.07
PRBVanEck Vectors Pre-Refunded Municipal Index ETFBroad Maturities $19.7 0.86%2.23
IBMHiShares iBonds Sep 2019 Term Muni Bond ETFIntermediate $129.1 1.01%2.69
SMBVanEck Vectors AMT-Free Short Muni Index ETFShort-Term $282.1 1.11%2.82
SHMSPDR Nuveen Barclays Short Term Muni Bond ETFShort-Term $3,160.0 0.79%2.92

Source: FactSet Data Systems via, as of 11/8/16.


Patrick Luby is a municipal bond portfolio strategy specialist and the author of

At the time of writing, the author held none of the securities referenced. This is not a recommendation to buy, sell or hold any of the securities or strategies mentioned. The author 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. Information is based on sources believed to be reliable, but its accuracy is not guaranteed. Additional information is available upon request.


Patrick Luby is the municipal strategist with CreditSights Wealth and has decades of experience in the municipal bond market.