State Street SPDR Nuveen ICE High Yield Municipal Bond ETF

HYMB

Market cap $3.09B

One of the few downsides of passive income from stocks and bonds is that the income generated by those investments is subject to federal and state income tax.

The 10-year Treasury yields 4.43%, which sounds competitive until a high earner runs it through the tax screen.

A $75,000 salary sits at the top of the U.S. median household range, but for a retiree in a high federal and state bracket, replacing it with taxable income means earning much more before Uncle Sam takes his cut.

HYMB is a high-yield municipal bond ETF. It focuses on riskier non-investment grade and unrated securities, with sizable investments in quality investment-grade securities. It offers investors a tax-advantaged 4.5% yield. After-tax income should be higher than that of most bonds for investors in the higher tax brackets.

State Street® SPDR® Nuveen ICE High Yield Municipal Bond ETF (HYMB) is rated a buy, while VanEck High Yield Muni ETF (HYD) is rated hold. HYMB offers higher yields and better risk-adjusted returns despite a slightly higher expense ratio and increased volatility compared to HYD. Current stabilizing interest rates and resilient municipal fundamentals create a favorable outlook for high-yield municipal bonds.

Many Boomers in 2025 need dependable passive income, and one outstanding way to achieve this is to invest in exchange-traded funds (ETFs).

SPDR Nuveen ICE High Yield Municipal Bond ETF offers exposure to lower-rated and unrated municipal bonds, aiming for higher tax-exempt yields. HYMB tracks an index, resulting in broad diversification but limited selectivity, which may cap potential returns compared to more actively managed muni funds. The ETF's current yield of 4.53% is not compelling vs. alternatives like SHYM and NMCO, which offer similar or better returns with less interest rate risk.

HYMB offers a high yield but exposes investors to significant credit and transmitting duration risk, especially with some initial recessionary flashes from the jobs data. Strong Q2 demand for municipal bonds may not persist if recessionary pressures increase. HYMB's sensitivity to credit spreads and baseline rates, combined with a high expense ratio, makes it less appealing than safer Treasury ETFs.

Fund-level leverage is only attractive when carry or capital gains potential is high; current tight spreads and an inverted yield curve make it less appealing. For tax-exempt CEFs, higher yields often come from longer duration, not leverage; unleveraged long-duration funds or ETFs can offer similar or better yields. Investors should not assume more leverage is always better; careful, situation-specific exposure to fund-level leverage is key to balancing risk and return.

HYMB focuses on high-yield muni bonds. It offers investors a tax-advantaged 4.5% dividend yield and competitive after-tax returns. HYMB is a solid investment opportunity and should be of particular interest to investors in taxable accounts facing higher marginal tax rates.