As part of an expansion of its suite of municipal bond exchange-traded funds, Van Eck Global launched a high-yield muni ETF yesterday.

This is the company's fifth muni ETF, joining the short, intermediate, and long ETFs, and the pre-refunded ETF, which launched Tuesday.

Van Eck claims high-yield municipals, which usually are either unrated or carry junk ratings, represent a "significant investment opportunity."

High-yield munis have been clobbered since 2007, and Van Eck claims investors now have an opportunity to pick up fat yields with a relatively low default rate.

Like its other ETFs, the high-yield ETF seeks to replicate an index by creating a portfolio with a sampling of bonds from that index.

The ETF, which trades on the New York Stock Exchange's Arca platform under the symbol "HYD," attempts to mimic the Barclays Capital Municipal Custom High Yield Composite Index.

With 4,186 bonds and a 5.83% average coupon, this index plummeted 28% last year. The bonds in the index include debt issued by hospitals, nursing homes, colleges, and charter schools.

Portfolio managers James Colby and Michael Mazier have so far bought 46 issues to try and mirror the index. The fund charges an expense ratio of 0.35%.

Van Eck acknowledges these types of bonds are often small and prone to illiquidity. After such severe price declines, though, high-yield municipals offer compelling yields, Van Eck said.

"Market Vectors is pleased to offer the first ETF in this segment of the municipal bond market," Jan van Eck, principal of Van Eck Global, said in a statement. "Although high-yield munis, like many other asset classes, have experienced sharp price declines in the current economic and financial climate, their current prices relative to historical default rates suggest considerable value."

According to Moody's Investors Service, the average rolling 10-year default rate for high-yield munis was 4.3% between 1970 and 2005. By comparison, high-yield corporate bonds had a default rate of 32.7%.

Since late 1995, high-yield municipals have averaged a yield 242 basis points higher than investment-grade munis, according to Barclays Capital indexes tracking the investment types.

The spread reached as high as 636 basis points during the credit crisis as investors sought only the safest paper.

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