Barclays Global Investors launched a municipal bond exchange-traded fund, and State Street Corp. plans to launch one this week.
The unit of London's Barclays PLC's iShares S&P National Municipal Bond Fund began trading Monday on the American Stock Exchange.
The fund, which carries an annual expense ratio of 0.25%, is designed to track a newly created Standard & Poor's Corp. liquid, institutional quality municipal bond index.
The typical municipal bond fund has an expense ratio of 2% of the purchase price, according to Barclays.
The index will include tax-exempt bonds that have at least $50 million that have a minimum rating of triple-B-minus and are sold by state and local governments.
State Street Global Advisors, State Street's investment management arm, said its SPDR Lehman Municipal Bond Exchange-Traded Fund will begin trading on the American Stock Exchange on or about Thursday.
The fund seeks to correspond with the performance of the Lehman Brothers Municipal Managed Money Index, State Street said Tuesday.
The index, which was launched in June 2004, provides exposure to over 22,000 issues in the most liquid segment of the municipal bond market.
Anthony Rochte, a senior managing director at State Street Global Advisors, said its new exchange-traded fund will have an annual expense ratio of 0.2%.
The two funds give investors an opportunity to invest in the $2.4 trillion U.S. municipal bond market without owning individual bonds directly.
