Mortgage-backed ETF begins trading on Amex

March 16, 2007

SAN DIEGO (ETFguide.com) - Despite a quiet last year, the fixed income category has picked up this year by adding another new exchange-traded fund (ETF).

Today, Barclays Global Investors (BGI) launched the iShares Lehman MBS Fixed-Rate Bond Fund (AMEX: MBB) on the American Stock Exchange. The move will expand the investment firm's lineup of fixed income ETFs to 15.

The fund's annual expense ratio is 0.25% and the underlying index includes securities issued by GNMA, FHLMC, and FNMA that have 30-, 20-, 15-year and balloon securities that have a remaining maturity of at least one year and have more than $250 million or more of outstanding face value. In addition, the securities must be denominated in U.S. dollars and must be fixed-rate and non-convertible. As of February 1, 2007, there were 387 issues included in the underlying index. The fund uses a representative sampling strategy in seeking to track the underlying index.

One of the advantages of bond ETFs over bond mutual funds is intra-day pricing, transparency and rock bottom expense ratios.

"Many investors have recognized that iShares fixed income funds help clear the opaqueness of fixed income investing that some investors experience. iShares has now brought this same level of transparency to the U.S. mortgage market," said Lee Kranefuss, CEO of BGI's Intermediary and Exchange Traded Funds Business.

He added, "For the first time investors are able to observe intra-day pricing of a basket of mortgage securities, and have the flexibility to implement their market views throughout the trading day. Investors can place limit and stop-loss orders on the iShares MBS Fund that allow them to better time entry and exit into the market, and the fund can be shorted on a downtick, making it a valuable risk management tool."