Muni ETFs Lock Horns

Investors searching for tax-exempt income do not have just one new place to look in the ETF marketplace, but two.

In September, Barclays Global Investors launched the iShares S&P National Municipal Bond Fund (MUB) on the American Stock Exchange. The move expanded the investment firm’s hold on the fixed-income ETF category, bringing its total bond-oriented ETF lineup to 17 funds.

MUB contains municipal bonds from a diverse group of U.S. state and local governments, as well as paper from issuers in U.S. territories like Puerto Rico, U.S. Virgin Islands and Guam. Each bond must be denominated in U.S. dollars and have a minimum par amount outstanding of $50 million.

According to the prospectus, the fund’s annual expense ratio is 0.25 percent.

In related news, State Street Global Advisors launched a competing muni bond fund. The SPDR Lehman Municipal Bond ETF (TFI) contains a mix of bonds issued from various states and charges an annual expense ratio of 0.20 percent.

All bonds in the Lehman index must have a minimum credit rating of Aa3/AA or higher by at least two of the three major statistical ratings agencies: Moody’s, Standard & Poor’s and Fitch.