Barclays Launches First Mortgage Based Securities ETF

Barclays Global Investors launched Friday the first mortgage-backed securities ETF, its iShares Lehman MBS (mortgage-backed securities) Fixed-Rate Bond Fund, which trades under the symbol MBB. The new ETF has an expense ratio of 0.25%, and tracks an index of investment-grade fixed-rate mortgage-backed securities of government-sponsored mortgage issuers Ginnie Mae, Freddie Mac and Fannie Mae. All principal and interest payments from the mortgage pool are payed directly to investors, otherwise known as 'pass-through.' The index includes 30, 20 and 15-year securities that have at least one year until maturity and over $250 million in outstanding face value. While the index proper currently holds 387 issues, Barclays said it plans to sample the benchmark and not hold every security. Mutual funds that invest in mortgage-backed securities are nothing new, but MBB is the first ETF to address this well-followed market. While the listing's timing raised some eyebrows, considering the subprime market's well-publicized woes, the ETF holds no subprime debt, and according to Greg McBride, senior financial analyst at BankRate.com, it is not a "risky security." Trading on Friday was light.

Sources: MarketWatch, InvestmentWires
Commentary: New Mortgage -Backed Securities ETF Introduced • Seeking Alpha's coverage of New ETFs
Stocks/ETFs to watch: iShares Lehman MBS Fixed-Rate Bond Fund (MBB)

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