New VIX ETFs And Munibond ETFs Debut
February 3, 2009

SAN DIEGO (ETFguide.com) – The Market Vectors Pre-Refunded Municipal Index ETF (NYSEArca: PRB) was introduced today by New York-based Van Eck Global.

The fund is the first index ETF to focus on the pre-refunded segment of the municipal bond market.

PRB’s underlying index is the Barclays Capital Municipal Pre-Refunded—Treasury-Escrowed Index, which is a market-size weighted index comprised of publicly traded municipal bonds that cover the U.S. dollar-denominated tax-exempt bond market.

The index is comprised of pre-refunded and/or escrowed-to-maturity bonds, provided that the collateral in the escrow account is comprised strictly of obligations of and carry the full faith and credit of the U.S. Treasury. All bonds must have an explicit or implicit credit rating of AAA. As of December 31, 2008, the index had an average maturity of 4.11 years.

In related news, Barclays Bank PLC debuted the iPath S&P 500 VIX Short-Term Futures ETN (NYSE Arca: VXX) and the iPath S&P 500 VIX Mid-Term Futures ETN (NYSE Arca: VXZ).

What makes the Volatility Index (VIX) attractive is its negative correlation to the market. Times of distress are usually market by increased volatility. There is no economic return component to the VIX, it simply measures volatility.

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Keep in mind that the VIX ETFs are a better for traders than long-term investors. As we’ve seen with commodity ETFs, the futures markets does not always reflect the exact performance of the underlying assets.

ETNs are debt instruments linked to the performance an index. ETNs, unlike ETFs, carry credit issuer risk similar to the risk of investing in individual bonds.  

VXX is designed to track the S&P 500 VIX Short-Term Futures Index TR which targets a constant weighted average future maturity of one month. In contrast, VXZ is designed to track the S&P 500 VIX Mid-Term Futures Index TR which targets a constant weighted average futures maturity of five months.

Barclays Bank PLC is the issuer, Barclays Capital is the issuer’s agent and Barclays Global Investors assists in the marketing of iPath ETNs. The VIX indices were created by Standard & Poor’s. ). Both VIX ETNs provide investors with exposure to one or more maturities of futures contracts on the CBOE Volatility Index which reflects the implied volatility of the S&P 500 Index at various points along the volatility forward curve.