Amplify Targets Tax-Free Income With New Municipal CEF ETF

CHICAGO, IL – February 13, 2026 – Amplify ETFs, a prominent provider of exchange-traded funds, has officially filed plans for a new fund aimed at investors seeking high, tax-advantaged income. The proposed Amplify Municipal CEF High Income ETF, which will trade under the ticker YYYM, seeks to provide a systematic, index-based approach to the often-complex world of municipal closed-end funds (CEFs).

The filing with the Securities and Exchange Commission (SEC) outlines a "fund of funds" strategy. YYYM will aim to track the Nasdaq Municipal Bond CEF High Income™ Index, a benchmark composed of 30 U.S. exchange-listed municipal bond CEFs. According to the preliminary prospectus, the fund will invest at least 80% of its assets in the constituent funds of this index, which are selected and ranked based on factors designed to generate high current income.

The Search for Tax-Efficient Yield

The move comes as investors and financial advisors continue to grapple with a persistent challenge: sourcing reliable and substantial income streams, particularly on an after-tax basis. Amplify's filing for YYYM directly targets this demand.

“In today’s market, advisors and investors are actively searching for differentiated tax-efficient strategies that aim to produce high income,” said Christian Magoon, CEO of Amplify ETFs, in the company's announcement.

Municipal bonds have long been a cornerstone for income-focused portfolios, especially for individuals in higher tax brackets. The interest income they generate is typically exempt from federal income taxes and, in many cases, state and local taxes for residents of the issuing state. This tax efficiency can result in a significantly higher tax-equivalent yield compared to corporate bonds or other taxable fixed-income instruments. The market has seen a "great rotation" of capital into fixed income over the past year, with municipal bond funds experiencing strong inflows as investors move cash from lower-yielding money market funds.

YYYM aims to tap into this trend by focusing on municipal closed-end funds, a vehicle known for its potential to deliver enhanced yields, often through the use of leverage. This positions the proposed ETF as a potential solution for retirees, high-net-worth individuals, and anyone seeking to maximize their portfolio's income generation while managing tax liabilities.

A Systematic Approach to a Complex Market

While offering attractive yields, the municipal CEF market is not without its complexities. Unlike traditional mutual funds or ETFs, closed-end funds issue a fixed number of shares that trade on an exchange like stocks. This structure means their market price can, and often does, deviate from the underlying value of their assets, known as the Net Asset Value (NAV). This can result in the funds trading at either a discount or a premium to their NAV.

Historically, savvy investors have sought to buy CEFs at a significant discount, hoping to benefit from both the income stream and potential capital appreciation if the discount narrows. The average discount for municipal bond CEFs has seen significant movement, narrowing from over -10% in early 2024 to around -3.8% in early 2026, reflecting shifting investor sentiment.

Another defining characteristic of municipal CEFs is the prevalent use of leverage. Approximately 97% of tax-free income CEFs employ some form of borrowing to purchase additional securities, with the goal of amplifying returns and distributions. While this can boost yield, especially in a favorable interest rate environment, it also magnifies risk, increasing volatility and potential losses if the market moves unfavorably. These funds are also highly sensitive to changes in interest rates, as rising rates increase borrowing costs and can erode the value of the underlying bonds.

Amplify's proposed solution with YYYM is to apply a rules-based, systematic methodology via the Nasdaq index. This approach is designed to navigate the intricacies of CEF selection—such as analyzing yields, discounts, and liquidity—in a disciplined manner. "With the filing of YYYM, we are applying a systematic, rules-based approach to municipal closed-end fund exposure, an area where thoughtful structure can make a meaningful difference,” Magoon noted. By tracking an index, the ETF aims to remove the guesswork and emotional decision-making often associated with picking individual CEFs.

Navigating the Competitive Landscape

Amplify is not the first to offer an ETF of municipal CEFs. The new fund will enter a market with established players, most notably the VanEck CEF Municipal Income ETF (XMPT), which also provides exposure to a basket of municipal CEFs. However, YYYM's key differentiator will be its underlying index—the Nasdaq Municipal Bond CEF High Income™ Index. The specific methodology and selection factors of this index will be crucial in setting YYYM apart from its competitors.

Beyond direct "fund of funds" competitors, YYYM will also compete with a broader universe of municipal bond ETFs. These include large, passive funds that invest directly in municipal bonds, such as the iShares National Muni Bond ETF (MUB) and the Vanguard Tax-Exempt Bond ETF (VTEB), as well as funds that target the high-yield segment, like the VanEck High Yield Muni ETF (HYD). YYYM's unique value proposition is its specific focus on the CEF structure, which combines the tax advantages of municipal bonds with the potential for higher income and capital appreciation from discount-to-NAV dynamics.

Amplify's Expanding ETF Suite

The filing for YYYM is consistent with Amplify's broader strategy of developing specialized, "breakthrough" ETF solutions. The firm, which has grown to over $20 billion in assets under management, has a history of launching innovative products. This includes its flagship Amplify CEF High Income ETF (YYY), a similar fund-of-funds product that invests in a broader universe of CEFs across different asset classes. The launch of YYYM represents a logical extension of this expertise, applying a successful concept to the specific niche of municipal bonds.

As a new filing, the Amplify Municipal CEF High Income ETF is still in the registration process with the SEC and a launch date has not been set. The preliminary prospectus cautions that investing involves significant risk, including the possible loss of principal. Because YYYM is a fund of funds, investors will indirectly bear a proportional share of the fees and expenses of the underlying CEFs in addition to YYYM's own management fees. The leverage employed by the underlying funds can increase volatility, and as a passively managed fund, it will not make tactical adjustments to its holdings based on market conditions outside of changes to its underlying index.