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.