BlackRock’s iShares has added a municipal bond ETF to help investors extend a bond ladder strategy in face of a rising interest rate environment.
BlackRock launched the iShares iBonds Dec 2025 Term Muni Bond ETF (Cboe: IBMN), which has a 0.18% expense ratio.
The iShares iBonds Dec 2025 Term Muni Bond ETF tries to reflect the performance of the S&P AMT-Free Municipal Series Dec 2025 Index, which is comprised of investment-grade, non-callable U.S. municipal bonds maturing in December 2025.
IBMN joins the other muni iBonds, including:
- iShares iBonds Sep 2017 Term Muni Bond ETF (NYSEArca: IBMF)
- iShares iBonds Sep 2018 Term Muni Bond ETF (NYSEArca: IBMG)
- iShares iBonds Sep 2019 Term Muni Bond ETF (NYSEArca: IBMH)
- iShares iBonds Sep 2020 Term Muni Bond ETF (NYSEArca: IBMI)
- iShares iBonds Dec 2021 Term Muni Bond ETF (NYSEArca: IBMJ)
- iShares iBonds Dec 2022 Term Muni Bond ETF (NYSEArca: IBMK)
- iShares iBonds Dec 2023 Term Muni Bond ETF (BATS: IBML)
- iShares iBonds Dec 2024 Term Muni Bond (BATS: IBMM)
These defined-maturity bond funds typically buy bonds that mature in the year the ETF will terminate, ensuring that investors can collect the bonds’ face value at maturity, along with a steady income stream along the way. Consequently, investors are meant to buy-and-hold these securities until maturity.
Like the new ETF’s name suggests, IBMN will provide exposure to investment-grade municipal bonds that mature in 2025 to help investors gain exposure to tax-exempt income, expand on a bond ladder and manage interest rate risk.
“The unique features of iShares iBonds ETFs can help you more easily build bond ladders, pick points on the yield curve, or even match expected cash flow needs in the future,” according to BlackRock.
In contrast, a regular bond ETF runs the risk of losing its original principal if interest rates go up, depending on the bond ETF’s effective duration, since the typical bond funds would buy and sell debt securities to maintain their target short-, intermediate- or long-duration strategy.
While financial advisors and investors have implemented a bond ladder strategy through individual debt securities, crafting bond ladders with individual bonds can be time consuming and cost prohibitive. Alternatively, investors can utilize target-date bond ETFs to easily create a bond ladder strategy.
By using target-date bond funds, a fixed-income investor could create a bond ladder strategy in a portfolio with varying maturity dates. The bonds’ maturity dates are evenly spaced across several years so that the proceeds from maturing bonds may be reinvested at regular intervals.
For more information on new fund products, visit our new ETFs category.