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BGI launches first state municipal bond iShares ETFs

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Barclays Global Investors has launched the iShares S&P California Municipal Bond Fund and iShares S&P New York Municipal Bond Fund on the American Stock Exchange, the first state m

Barclays Global Investors has launched the iShares S&P California Municipal Bond Fund and iShares S&P New York Municipal Bond Fund on the American Stock Exchange, the first state municipal bond ETFs available to US investors.

The launch of the two funds follows the introduction last month of the first nationwide US municipal bond fund, the iShares S&P National Municipal Bond Fund, which has already attracted approximately USD330m in assets under management and has an average daily trading volume of 43,000 shares.

The state municipal bond funds are designed to track liquid institutional-quality municipal bond indices produced by Standard & Poor’s, and each has an annual expense ratio of 0.25 per cent.

‘We’re pleased to offer investors the first suite of municipal bond ETFs,’ says Noel Archard, head of US iShares product development. ‘The positive response to the iShares S&P National Municipal Bond Fund demonstrates that investors value iShares’ low cost and tax efficiency, ease of trading and liquidity. The potential benefits of iShares become more evident in markets that are traditionally illiquid and expensive.’

The S&P California Municipal Bond Index is a subset of the S&P National Municipal Bond Index and is comprised of municipal bonds from issuers from California state or local governments or agencies whose interest payments are exempt from US federal and California state income taxes and the federal alternative minimum tax.

The S&P New York Municipal Bond Index is a similar subset of the National Municipal Bond Index that tracks municipal bonds from state of local government issuers in the New York state.

To be included in the indices, bonds must have a rating of at least BBB- from Standard & Poor’s, Baa3 from Moody’s Investors Service or BBB- from Fitch, and a minimum par amount outstanding of USD50m. The indices are market value-weighted and the securities in the indices are updated after the market close on the last business day of each month.

‘The American Stock Exchange is pleased to be partnering with BGI to bring two new iShares municipal bond ETFs to the marketplace,’ says Scott Ebner, senior vice-president of the Amex ETF Marketplace. ‘These innovative ETFs are the first to focus on the municipal bond markets of California and New York and they are a welcome addition to the ETF market.’

Barclays Global Investors is one of the world’s largest asset managers providing structured investment strategies such as risk-controlled active strategies and indexing. BGI is a leader in ETFs through its iShares brand with more than 190 ETFs globally.

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