| Bonds Online |
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| 5/10/2013Market Performance |
| Municipal Bonds |
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S&P National Bond Index
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3.00% |
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S&P California Bond Index
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2.96% |
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S&P New York Bond Index
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3.13% |
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S&P National 0-5 Year Municipal Bond Index
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0.70% |
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| S&P/BGCantor US Treasury Bond |
400.09 |
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| Income Equities: |
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| Preferred Stocks |
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S&P U.S. Preferred Stock Index
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848.03 |
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S&P U.S. Preferred Stock Index (CAD)
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636.26 |
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S&P U.S. Preferred Stock Index (TR)
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1,701.05 |
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S&P U.S. Preferred Stock Index (TR) (CAD)
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1,276.26 |
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| REITs |
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S&P REIT Index
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174.07 |
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S&P REIT Index (TR)
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425.30 |
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| MLPs |
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S&P MLP Index
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2,469.58 |
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S&P MLP Index (TR)
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5,428.50 |
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See Data
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Muni ETFs Are Biggest Gainers in Fed’s Quarterly Data |
By Jeremy R. Cooke
Dec. 10 (Bloomberg) -- Exchange-traded funds added holdings of U.S. municipal securities at the highest rate among investor groups in the third quarter, based on Federal Reserve data that for the first time broke out ETF buying.
Municipal holdings in exchange-traded funds rose 28 percent to $5.1 billion in the July-to-September period, according to Fed figures released today.
Asset management companies have created at least 20 ETFs to invest in bonds and notes issued by state and local governments since the September 2007 inception of the iShares S&P National AMT-Free Municipal Bond Fund. Investors are taking advantage of lower average operating expenses than index mutual funds and the flexibility to buy and sell shares at intraday prices quoted on stock exchanges. Exchange-traded funds typically track the performance of financial market indexes.
“Financial advisers are slowly becoming more aware of the product,” said Michael Mazier, a co-manager of five municipal exchange-traded funds at Van Eck Global in New York.
Invesco Ltd., the Atlanta-based asset manager, introduced the PowerShares Build America Bond Portfolio last month as the first ETF to invest in taxable, federally subsidized debt issued under the U.S. economic stimulus program.
Pacific Investment Management Co. in Newport Beach, California, last week created the Pimco Intermediate Municipal Bond Strategy Fund as the first actively managed ETF of its kind, seeking to beat rather than match the performance of a benchmark index.
ETF Growth
The first municipal ETF, with the ticker MUB, has grown to $1.57 billion from less than $300 million, Bloomberg data show.
Previous quarterly releases of the Fed’s flow of funds accounts report haven’t listed a separate category for exchanged-traded funds under its accounting of the size and composition of the market for municipal securities and loans.
Tax-exempt bonds, which make up the majority of municipal securities, turned in their best performance in at least 20 years during the third quarter, returning 8.1 percent, according to the BofA Merrill Lynch Municipal Master Index.
The size of the municipal market -- including short- and long-term debt from states and local governments as well as bonds sold for nonprofit groups and certain corporate businesses -- rose less than 1 percent to $2.77 trillion Sept. 30, the latest data from the central bank show. The June 30 total was revised lower to $2.75 trillion from $2.78 trillion.
Mutual Funds
Mutual funds, whose net asset values are quoted once a day, were the biggest buyers of municipal bonds during the third quarter based on dollar amount. Their holdings grew $29.3 billion, or 6.8 percent, to $460 billion, Fed data show.
Households, the largest single investor group in state and local government debt, added $10 billion, or 1 percent, pushing their holdings to $979.5 billion, the Fed said.
Foreign investors, whose municipal holdings rose by the most of any investor group in the second quarter, accelerated their buying as sales of taxable, federally subsidized Build America Bonds enticed buyers more interested in higher yields than tax-free income. The “rest of the world” category in the Fed figures rose $7.9 billion, or 17 percent, to $53.5 billion, double the figure at the end of 2004.
Securities dealers, closed-end funds, property and casualty insurers and corporations each added at least $1 billion of municipal bonds or notes during the third quarter, while money- market funds, commercial banks and government-sponsored enterprises shed them, the Fed said.
To contact the reporter on this story: Jeremy R. Cooke in New York at jcooke8@bloomberg.net.
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Income Security Recommendation January 2013 Issue.
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