Barclays Global Investors was in its own little universe after its
iShares S&P National Municipal Bond Fund (MUB) began trading Monday
on the American Stock Exchange as the first U.S.-listed muni bond ETF.
But now it has company after
yesterday's launch of the SPDR Lehman Municipal Bond ETF (TFI) by State
Street Global Advisors, also on the Amex.
And more are on
the way. PowerShares this summer announced plans to launch two muni
ETFs based on Merrill Lynch indexes. Also this summer, Van Eck
Securities Corp. filed papers to create six muni ETFs that will track
Lehman Brothers indexes.
As its name
implies, the iShares S&P National Municipal Bond Fund tracks the
S&P National Municipal Bond Index, which includes bonds mainly from
state or local governments or agencies that pay interest that's exempt
from U.S. federal income taxes. Each bond must have a rating of at
least BBB- and must have a minimum par amount outstanding of $50
million. The fund's annual expense ratio is 0.25%.
TFI, which focuses
on higher-grade bonds, seeks to replicate the price and yield
performance of the Lehman Brothers Municipal Managed Money Index. All
bonds in the index must be rated Aa3/AA or higher. Each index component
must have an outstanding par value of at least $7 million and be issued
as part of transaction of at least $75 million. The bonds must be fixed
rate, have been issued within the last five years, and must be at least
one year from their maturity date. Bonds subject to Federal alternative
minimum tax, hospital bonds, housing bonds, tobacco bonds, and airline
bonds, along with remarketed issues, taxable municipal bonds, floaters,
and derivatives are all excluded from the Index.
The fund's expense ratio is 0.20.