New iShares Muni-Bond ETF LMUB Hits NYSE As Demand Surges

BlackRock has continued to expand its suite of municipal bond ETFs with the introduction of the iShares Long-Term National Muni Bond ETF LMUB. The new ETF, which follows the ICE AMT-Free US Long National Municipal Index, is intended to offer exposure to investment-grade U.S. municipal bonds with maturities remaining of 12 years or more. A prominent feature of LMUB is its emphasis on federal income tax-exempt municipal bonds, and is thus viewed as a sound option for tax-sensitive investors, reported etftrends.com.

Boasting an expense ratio of 0.09%, LMUB offers a low-cost solution for investors seeking to gain exposure to long-term municipal bonds. The ETF represents a growth of BlackRock’s lineup of municipal bond ETFs to 16 funds. The largest existing fund at the firm in the space, the iShares National Muni Bond ETF MUB, has $39.2 billion in assets under management and is the largest U.S.-listed municipal bond ETF trading today.

Also Read: BondBloxx, IR+M Roll Out New Tax-Smart ETFs For Investors

Growing Demand For Municipal Bond ETFs

The introduction of LMUB is timely as investor demand has been increasing for municipal bond ETFs. The funds offer exposure to tax-free income and can be a significant component of diversified fixed-income portfolios. With investors continuing to adapt to evolving interest rate conditions, municipal bond ETFs are increasingly becoming a go-to portfolio construction tool.

Competition Heats Up In The Muni-Bond ETF Space

The muni bond ETF market is still a niche part of the overall ETF space, with total assets of around $146 billion—less than the $10 trillion U.S. ETF universe, according to Bloomberg. But competition is heating up, as issuers hurry to provide new products to capture increasing demand. Wall Street saw more than two dozen new muni ETF launches in 2024, a record for the group.

Also Read: BlackRock’s Latest ETF Conversion Taps Into Growing Muni Bond Interest

At the same time, Vanguard Group Inc. is growing its municipal bond ETF lineup. On Mar. 6, Bloomberg revealed that the company will roll out two new funds soon: the Vanguard New York Tax-Exempt Bond ETF (MUNY) and the Vanguard Long-Term Tax-Exempt Bond ETF (VTEL). Both will serve up state-specific tax benefits and long-duration muni bond exposure for investors.

As demand surges and competition intensifies, investors have more options in municipal bond ETFs to choose from, with customized solutions tailored to various tax and duration expectations. The introduction of LMUB by BlackRock itself highlights the increased prominence of muni-bond ETFs in today’s changing fixed-income landscape.

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