High-Yield Municipal Bond ETFs offer investors a compelling opportunity to generate tax-advantaged income by investing in municipal bonds that are rated below investment grade. These funds focus on debt issued by state and local governments to finance public projects, but target bonds with higher yields to compensate for their increased credit risk. For investors with a higher risk tolerance, this category can serve as a potent source of tax-free income and portfolio diversification, offering a distinct risk-reward profile compared to both investment-grade municipal bonds and high-yield corporate bonds.
Summary (as of 7/31/2025)
- Number of Funds: 15
- Total Assets Under Management (AUM): $9.9B
- Average Expense Ratio: 0.79%
- 1-Month Net Flows: $0.18B
- 1-Year Net Flows: $0.28B
The High-Yield Municipal bond category is a significant niche in the fixed income landscape, with nearly $10 billion in assets spread across 15 funds. The recent positive net flows over the last month and year suggest that investors are increasingly turning to this category, likely in search of higher yields in a challenging income environment, despite the associated risks.
Performance Snapshot (as of 7/31/2025)
The performance within the high-yield municipal bond space shows a wide dispersion, underscoring the critical importance of careful fund selection. While the category’s average 1-month return was -1.42%, the performance of individual funds varied dramatically. The top-performing fund, the VanEck Short High Yield Muni ETF (SHYD), delivered a 1-month return of -0.11%. In stark contrast, the bottom-performing fund, the Macquarie National High-Yield Municipal Bond ETF (HTAX), posted a 1-month return of -2.51%. This represents a total performance spread of 2.40% between the best and worst performers in a single month, highlighting that a deeper dive into fund-specific strategies is essential.
Drill Down: A Glimpse into the Full Report
The summary data only scratches the surface. Our in-depth report reveals critical insights that can help you make more informed decisions. Here are a few key takeaways:
- Structure & Market Share: Discover how concentrated this category is, with the top three funds—HYD, HYMB, and HIMU—controlling a remarkable portion of the total assets.
- Flows & Investor Sentiment: While the category saw significant inflows last month, the SPDR Nuveen ICE High Yield Municipal Bond ETF (HYMB) led the pack, attracting over $77 million in new assets.
- Risk-Adjusted Returns: The full report identifies funds like the VanEck Short High Yield Muni ETF (SHYD), which has delivered a top-decile Sharpe Ratio of 0.68 over the last three years.
- Portfolio Composition: Understand what you truly own. The average fund in this category has a 99.5% allocation to the Municipal sector.
- Fundamentals: Pinpoint funds that align with your investment style. Whether you’re seeking higher Yield or better Credit quality, our report scores every fund, highlighting top-rated ETFs in each dimension.
Call to Action
This is just a glimpse of the data available in our full report. By creating a free account, you can access the complete Fixed Income: Municipal – High Yield report and unlock all of these insights.
ETF category data is updated daily in the Home Office section of the ETF Action platform. Monthly summary PDFs (available to DIY subscribers and up) and in-depth excel data packs (available to Advisor Pro subscribers and up) are available on over 100 ETF categories.
Disclosure: This category snapshot was prepared with the assistance of artificial intelligence.
