Barclays Global Is Again First Mover With Cali/NY Muni Bonds ETFs

Two more municipal bond ETFs began trading on the Amex Friday. Barclays was the first mover in the muni bond ETF area last month, beating State Street Global Advisors (SSgA) to market by about a week, and now it's the first to expand its muni bond offerings.

The iShares S&P California Municipal Bond Fund (CMF) and the iShares S&P New York Municipal Bond Fund (NYF) cover two of the biggest municipal bond markets in the country. They track subsets of the index underlying the iShares S&P National Municipal Bond Fund (MUB). The S&P National Municipal Bond Index tracks about 3,000 securities. Both ETFs feature an expense ratio of 25 basis points.

BGI is being very aggressive in this market. SSgA has yet to follow up the launch of its first muni bond ETF with additional products in that area, and the two other competitors, PowerShares and Van Eck, have not even entered the market yet with any of the muni bond ETF products they have filed for. All three competitors also plan to launch ETFs for the New York and California muni bond markets.

The logical expectation is that SSgA will follow quickly with the launch of its own products in waiting. But what remains to be seen is whether SSgA will offer the cheaper product as it has done with its SPDR Lehman Municipal Bond ETF (TFI). SSgA's TFI has an expense ratio of just 20 basis points, 5 basis points cheaper than MUB. The hope for a similar expense ratio for SSgA's California and New York ETFs could cause investors to refrain from investing in NYF and CMF until they know the outcome.

Written by Heather Bell

• More on Broad US Bond ETFs

Comments

[Frank Li]

Why would anyone buy a Putnam or Nuveen closed-end muni bond fund now that these are available?