First muni ETF debuts on AMEX

The first exchange traded fund to invest in municipal bonds began trading today on the American Stock Exchange. The iShares S&P National Municipal Bond Fund from Barclays Global Investors of San Francisco, however, won’t be the last muni ETF. Barclays plans to launch additional such ETFs. And State Street Global Advisors of Boston, Van Eck Global in New York, and PowerShares Capital Management LLC of Wheaton, Ill., have all filed to offer their own muni ETFs. The new Barclays’ ETF will follow the S&P National Municipal Bond Index, which includes bonds from issuers that are primarily state or local governments or agencies such that the interest in the bond is 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 ETF will have an expense ratio of 0.25%. “Investors have been looking for a simple and cost-effective method of gaining exposure to the municipal market, which is traditionally a less liquid and expensive marketplace especially for those building a portfolio of individual issues,” Noel Archard, head of U.S. iShares Product Development, said in a statement. “The iShares S&P National Municipal Bond Fund looks to solve those problems. BGI applied its quantitative investment management expertise to deliver what it believes is a quality municipal ETF accessible to investors.”