ETF Spotlight on iShares Barclays MBS Bond Fund (NYSEArca: MBB), part of an ongoing series.
Assets: $5.9 billion.
Objective: The iShares Barclays MBS Bond Fund tries to reflect the performance of the Barclays U.S. MBS Index, which tracks investment grade agency mortgage-backed securities sector of the U.S.
Holdings: Mortgage-backed securities.
What You Should Know:
- BlackRock’s iShares sponsors the fund.
- MBB has an expense ratio of 0.26%.
- The fund has 358 holdings and the top ten make up 11.6% of the overall portfolio.
- Credit ratings include 96.9% AA+/Aaa and 3.1% in other securities.
- Sector allocations include conventional 30 year 55.4%, GNMA 30 years 21.8%, conventional 15 years 14.0%, conventional 20 year 3.2%, 5/1 ARM 0.9%, 7/1 ARM 0.5%, 10/1 ARM 0.4%, GNMA 15 years 0.4%, agency hybrid ARM 0.3% and 3/1 ARM 0.1%.
- The 30-day SEC yield is 3.1%.
- MBB has a 2.41 year maturity and an effective duration of 1.35 years – the duration is a measure of the fund’s price to changes in interest rate.
- The ETF is up 0.6% over the past month, up 1.0% over the last three moths and up 2.3% year-to-date.
- The fund is 0.6% above its 200-day exponential moving average.
- “Investors might be wary of investing in mortgage bonds considering the real estate market’s poor health, but bonds issued by Fannie Mae and Ginnie Mae have had the backing of the U.S. government since the financial crisis,” according to Morningstar analyst Timothy Strauts. “This backing guarantees payment of principal interest regardless of the rate of home foreclosures.”
The Latest News:
- Including the new quantitative easing plan and current reinvestment of mortgage coupons, the Fed will purchase about $65 billion in mortgages per month, or over half the monthly new issuance of $20 to $30 billion this year, Financial Times reports. [Mortgage-Backed Securities ETFs and QE3]
- The 30-year MBS coupon was trading close to 2.0% Wednesday, compared to 2.4% in just last week, reports MNI.
- The spread between MBS coupons and a blend of Treasury 5-year and 10-year notes is around 81 basis points Wendesday.
- “[MBS bond ETFs] will see further price increases, and yield declines, each month that the Fed buys $40 billion worth,” John Graves, editor of “The Retirement Journal,” said in an Investor Business Daily article. “The Fed has guaranteed a market for these securities, as they have for $2 trillion in U.S. bonds.”
iShares Barclays MBS Bond Fund
For past stories in this series, visit our ETF Spotlight category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.