This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

The Lowdown on Deutsche's New Bond Fund

NEW YORK ( TheStreet) - Deutsche Bank (DB - Get Report) has quietly built a line of unique exchange-traded funds. This week, it expanded its lineup with the db X-trackers Municipal Infrastructure Revenue Bond Fund (RVNU).

The municipal bond market typically divides into two categories: general obligation bonds, which are back by the credit and taxing power of the state, and revenue bonds, which are tied to an income stream like tolls collected on a bridge or highway.

Before the financial crisis, it was generally accepted that general obligation, or GO, bonds were safer than revenue bonds, but with so many states facing financial problems, investors gravitated to revenue bonds because the revenue in question must go toward interest payments as stipulated in the bonds' covenants.

With that in mind, RVNU owns only revenue bonds, more specifically revenue tied to things like water, toll roads and other infrastructure projects. That might seem like a Build America Bond fund. But those bonds, which were created as part of the American Recovery and Reinvestment Act of 2009, are taxable, and the bonds held in RVNU are tax exempt. There are a couple of Build America Bond funds including the PowerShares Build America Bond Portfolio (BAB).

Bonds tied to transportation make up the largest sector of the new Deutsche fund at 42%, followed by water and sewer at 24%, with the other sectors being much smaller. The larger states in the fund are New York 23%, Texas 20%, Florida 13% and California 11%. The credit quality is good but not AAA; about 80% of the fund is AA or A rated.

Deutsche Bank reports that the "yield to worst" for the underlying index is 3.22%, which after accounting for the 0.30 expense ratio, could put the yield of the fund just under 3%. As is the case with all ETFs, however, future payouts should be expected to vary. The use of the word "worst" as in yield to worst refers to least favorable outcome possible in terms of any of the fund's holdings being called before maturity.

Where the fund might pose a problem for investors is with the maturity. The average final maturity is 24 years with 21% of the fund maturing in 10-20 years, 62% maturing in 20-30 years and 15% going out past 30 years.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
BAB $30.41 0.00%
DB $16.67 0.00%
RVNU $27.24 0.00%
TLT $131.01 0.00%
AAPL $93.24 0.00%


Chart of I:DJI
DOW 17,660.71 +9.45 0.05%
S&P 500 2,050.63 -0.49 -0.02%
NASDAQ 4,717.0940 -8.5450 -0.18%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs