Barclays Global Investors launched the first U.S.-listed municipal bond exchange traded fund (ETF) to trade on the American Stock Exchange yesterday. iShares S&P National Municipal Bond Fund (MUB) is made to track a liquid, institutional quality municipal bond index with an expense ratio of 0.25%, Barclays says. This allows investors to place low cost bets on the $2.4 trillion U.S. municipal bond index without having to directly own bonds. The index will have 25 tax-exempt bonds that are sold by state and local governments in a size of at least $50 million and a rating of "BBB-minus." California has the most bonds at 20.4%, followed by New York at 19.6% and Puerto Rico at 7.5%. The weighted average maturity for MUB is 15.6 years.
Although Barclays was the first to launch a muni-bond ETF, State Street Global Advisors is hot on its heels. It will launch the SPDR Lehman Municipal Bond ETF (TFI) on or about Sept. 13. This ETF will track the Lehman Brothers Municipal Managed Money Index. The index provides exposure to more than 22,000 issues in the most liquid segment of the municipal bond market. The average credit quality of the bonds in TIF is AA1/AAA.
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