Barclays Global Investors, the world’s largest exchange-traded fund provider, has launched the iShares S&P Short Term National Municipal Bond Fund and iShares Barclays Agency Bond Fund
Barclays Global Investors, the world’s largest exchange-traded fund provider, has launched the iShares S&P Short Term National Municipal Bond Fund and iShares Barclays Agency Bond Fund on NYSE Arca to offer investors convenient, cost-effective, liquid ways to access the US municipal and agency fixed-income markets.
‘Recent volatility in the fixed-income markets has increased investor demand for products that are liquid and transparent,’ says Matthew Tucker, BGI’s head of US fixed-income investment strategy. ‘Fixed-income iShares ETFs have provided investors with access to a wide range of fixed income sectors in these difficult times.’
‘Municipals appeal to investors who seek tax-advantaged income and the yields are currently attractive. We are applying our quantitative investment management expertise to deliver a high-quality municipal ETF accessible to investors.’
The iShares S&P Short Term National Municipal Bond Fund, which has an expense ratio of 0.25 per cent, is designed to track the S&P National 0-5 Year Municipal Bond Index, which is weighted by market value and measures the performance of the short-term investment-grade segment of the US municipal bond market.
As of September 30, there were 1,725 issues in the index, including municipal bonds from issuers that are primarily state or local governments or agencies, including the Commonwealth of Puerto Rico and US territories). The interest on each bond is exempt from US federal income taxes and the federal alternative minimum tax.
To be eligible for inclusion, each bond must have a rating of at least BBB- from Standard & Poor’s, Baa3 from Moody’s Investors Service or BBB- from Fitch, be denominated in US dollars and have a minimum par amount of USD25m. The securities in the underlying index are updated after the close on the last business day of each month.
‘US agency exposure becomes increasingly important as investors diversify the fixed-income portion of their portfolios,’ Tucker says. ‘Agencies are one of the larger segments of the fixed-income market and made up 9.6 per cent of the Barclays Capital U.S. Aggregate Index at the end of October. The iShares Barclays Agency Bond Fund includes issuers such as Fannie Mae and Freddie Mac, whose securities are effectively guaranteed by the US federal government.’
The iShares Barclays Agency Bond Fund, which has an expense ratio of 0.20 per cent, aims to track the Barclays Capital U.S. Agency Index, which measures the performance of the agency sector of the US government bond market, and comprises investment-grade US dollar-denominated debentures issued by government and government-related agencies, including the Federal National Mortgage Association (Fannie Mae).
The index includes both callable and non-callable agency securities that are publicly issued by US government agencies, quasi-federal corporations, and corporate and foreign debt guaranteed by the US government.
To be eligible for inclusion, the securities must be fixed-rate and non-convertible and have a rating of at least BBB- from S&P, Baa3 from Moody’s or BBB- from Fitch, at least USD250m in par amount outstanding, and at least one year to final maturity.
Barclays Global Investors is one of the world’s largest asset managers with more than USD1.9trn in assets under management at the end of June. Having created the first index strategy in 1971 and the first quantitative active strategy in 1979, BGI is the global ETF leader with more than 330 iShares funds for institutions and individuals worldwide.