We have seen some improved trading volume relative to the average levels lately in the largest Mortgage-Backed bond ETF MBB (iShares MBS, Expense Ratio 0.27%) accompanied by some inflows stemming from creations.
Approximately $250 million has entered MBB on a rally in the underlying bonds in the portfolio (and generally a rally in bond prices across markets), and we note that this particular fund is the largest in this specific Fixed Income sub-category with assets topping $7.3 billion at this point.
In terms of AUM size relative to other funds in this space, MBB is an absolute giant with a substantial edge over the next largest fund which is VMBS (Vanguard Mortgage-Backed Securities, Expense Ratio 0.12%) which has $1.46 billion in assets under management.
Several other specialized funds exist here but are substantially smaller in terms of asset size, and are listed as follows from largest to smallest: CMBS (iShares CMBS, Expense Ratio 0.25%, $179 million in AUM), MBG (SPDR Barclays Capital Mortgage Backed Bond, Expense Ratio 0.20%, $150 million in AUM), GNMA (iShares GNMA Bond, Expense Ratio 0.15%, $60 million in AUM), MBSD (FlexShares Disciplined Duration MBS, Expense Ratio 0.20%, $18.6 million in AUM), and LMBS (First Trust Low Duration Mortgage Opportunities, Expense Ratio 0.65%, $5 million in AUM).
MBB itself has of course the advantages of size and tenure on the market, having debuted back in 2007, and a high level of familiarity among portfolio managers and ETF strategists who specify and perhaps build models in the Fixed Income ETF space, thus it is a regular recipient of asset flows when model rotation moves occur in the marketplace.
We see a yield at the moment of 1.70% in MBB, and it is rather safe to say that portfolio managers are not typically buying this product for high yield purposes, but rather steady and dependable income. Fund literature states when making the case for MBB that it grants “1) Exposure to broad range of U.S. mortgage-backed bonds including those issued by government sponsored enterprises such as Ginnie Mae, Fannie Mae, and Freddie Mac 2) Access to the domestic mortgage-backed bond market in a single fund and 3) Use to seek income.”
iShares MBS ETF
For more information on Street One ETF market commentary and ETF trade execution/liquidity services, contact Paul Weisbruch at pweisbruch@streetonefinancial.com
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