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Rieger report june 25 2018 taxable muni etf bab
1. Invesco Taxable Municipal Bond ETF (BAB)
June 25, 2018
JR Rieger
jrrieger@yahoo.com | (516) 524-1110 | theriegerreport.com
2. June 25, 2018
1 (516) 524-1110 jrrieger@yahoo.com | www.theriegerreport.com
6/25/2018
Invesco Taxable Municipal Bond ETF (BAB)
v.
Investment Grade Corporate Bond ETFs: Key Takeaways
• Currently there is one taxable municipal bond ETF of size: Invesco Taxable Municipal Bond ETF (Symbol: BAB) ($944mill AUM)
The benefits:
• Cost: Low cost passive access to the taxable U.S. municipal bond market: Management Fee = 28bps
• Quality: Investment grade taxable municipal bonds tend to have overall higher ratings than investment grade corporate
bonds
• Yield: Comparable yield characteristics to similar investment grade U.S. corporate bond ETFs (slightly lower due to
quality and technical market factors)
• SEC 30 Day: 3.77%
• Yield to Worst: 4.07%
• Yield to Maturity: 4.68%
• Duration: Comparable to investment grade corporate bond ETFs
• Technical factors: The taxable municipal bond market has a severe supply / demand imbalance, with recent supply
making only a small dent to offset the demand
• Diversification: Potentially good diversifier for investors in U.S. credit
Data as of 6/22/2018 or as otherwise stated. Sources: Invesco www.invesco.com. Past performance is not indicative of future results.
3. June 25, 2018
1 (516) 524-1110 jrrieger@yahoo.com | www.theriegerreport.com
6/25/2018
Invesco Taxable Municipal Bond ETF (BAB)
v.
Investment Grade Corporate Bond ETFs: Key Takeaways (Page 2)
The challenges:
• ETF Liquidity: Currently, BAB has lower ETF share trading volume v. comparisons in the investment grade U.S. corporate
bond ETFs
• Liquidity: In general, the taxable municipal bond market is less liquid than the investment grade corporate bond market
• Tracking Error: The one year tracking error of the ETF v. it’s index as of May 31, 2018 was 58bps
• Not of major concern given the nature of the muni market but something to keep an eye on
Rieger Report Bottom Line: Good diversification option for U.S. and global taxable bond investors
Data as of 6/22/2018 or as otherwise stated. Sources: Invesco www.invesco.com. Past performance is not indicative of future results.
4. June 25, 2018
1 (516) 524-1110 jrrieger@yahoo.com | www.theriegerreport.com
Taxable Muni
v.
Investment Grade Corporate Bond ETFs
(Over $500million in Assets)
Symbol Exchange Traded Fund Management
Fee
Inception
Date
AUM1 1 Year
Tracking
Error2
30 Day SEC
Yield
Duration
BAB Invesco Taxable
Municipal Bond
ETF
28bps 11/17/2009 $943mill 58bps 3.77% 8.22
LQD iShares iBoxx $
Investment Grade
Corporate Bond ETF
15bps 7/22/2002 $31.1bill 16bps 4.12% 8.40
CRED iShares U.S. Credit
Bond ETF
15bps 1/5/2007 $1.51bill 20bps 3.88% 6.95
CORP PIMCO Investment
Grade Corporate Bond
ETF
20bps 9/20/2010 $753mill 47bps 3.82% 6.72
1Assets Under Management. 2 As of 5/31/2018
Data as of 6/22/2018 or as otherwise stated. Sources: ishares by Blackrock, https://www.ishares.com/us , PIMCO www.pimco.com , Invesco www.invesco.com. Table is shown for
illustrative purposes only. Past performance is not indicative of future results.
5. June 25, 2018
1 (516) 524-1110 jrrieger@yahoo.com | www.theriegerreport.com
6/25/2018
Analyst Disclosure
• J.R. 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, J.R. Rieger does not own the ETF(s) cited in this report.