I like the concept(s) and innovation that iShares by BlackRock has brought to the market with their municipal iBond offering: Simply put, they work.
Design: The iBond ETFs are designed to mature like a bond & trade like a stock: By my count there has been 7 iBond Municipal ETFs that reached their final “maturity” and dispersed funds to investors in a similar fashion to a bond maturing
Result: An effective laddering tool for investors seeking low transaction cost exposure to specific maturity ranges
AUM: There is well over $1billion invested in the iBond Municipal ETFs
Quality: High quality tax-exempt exposure (82% by market value of the IBMN Dec 2025 iBond consists of AA and higher rated bonds)
Diversification: Each iBond Municipal ETF holds hundreds of bonds and no one State or issuer dominates
Yield: Impressively tight to the AA tax-exempt municipal bond market yield for each “maturing” year
iShares iBond Municipal ETFs
Sources:iShares by BlackRock. Table is shown for illustrative purposes only. Past performance is not indicative of future results. Data as of 1/25/2019.
iShares iBond Municipal ETFs
Sources:iShares by BlackRockand BondWave. Table is shown for illustrative purposes only. Past performance is not indicative of future results. Data as of 1/25/2019.
How the iBonds by iShares work using the IBMN iBond Dec 2024 Municipal ETF as an example:
Maturity: IBMN Dec 2024 is designed to provide exposure ONLY to bonds maturing after December 31, 2023 and before December 2, 2024 instead of number of years maturity (i.e. 5 years)
When new issues that qualify sell in the primary market they are added to the ETF. So there is a “current market” reflection due to the new issue inclusion
The roll down affect: Since only 2024 bonds are included, next year this will represent a 4 year market segment
Bonds are sold if they no longer qualify due to qualification rules such as if the rating of the bond fell below investment grade
Simple, low cost exposure to high quality tax-exempt municipal bonds in specific maturity date ranges.
Efficient exposure as the fund is buying bonds at institutional spreads and not higher cost retail spreads
iShares management fee of 18bps, while low by any standard, still chews up some yield in this low rate environment
Acceptance and use of the “longer” iBond ETFs is a factor to consider
I look to iShares for more innovation as these tools grow in use and popularity
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