iShares Short-Term National Muni Bond ETF (ARCA: SUB)

Latest news for iShares Short-Term National Muni Bond ETF (ARCA:SUB)

iShares Short-Term National Muni Bond ETF

iShares Short Term National AMT-Free Muni Bond ETF

The Fund seeks to track the investment results of the ICE Short Maturity AMT-Free US National Municipal Index (the Underlying Index), which measures the performance of short maturity U.S. dollar denominated investment grade tax-exempt debt publicly issued in the U.S. domestic market by U.S. states and their political subdivisions. As of February 28, 2023, there were 23,025 issues in the Underlying Index. As of February 28, 2023, a significant portion of the Underlying Index is represented by municipal bonds. The components of the Underlying Index are likely to change over time.

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Municipal Rally – Oh How Meredith Was Wrong

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BONDS: Michigan Only State To Lose Population (CXA, SUB, TFI, INY, SHM, VRD, ITM, MLN, PRB, TLT, TBT, TYO, TYD, TMV, TMF)

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With Europe having a sovereign debt crisis and the US fiscal cliff looming, what is the state of finances at the city-level? Here are the 10-best and 10-worst cities, courtesy of Experian. Keep in mind that the average credit score in the US is 748. Scores ranges from 501-990. Lots of love for the midwest, with six of the top ten cities located in that region of the country. Not too much love for the South though, with eight of the bottom ten coming from there.

The 10 Best
9. Sioux Falls, South Dakota. Average Credit Score = 777
9. Seattle, Washington. Average Credit Score = 777
7. La Crosse, Wisconsin. Average Credit Score = 778
7. Peoria, Illinois. Average Credit Score = 778
6. Boston, Massachusetts. Average Credit Score = 779
4. San Francisco, California. Average Credit Score = 780
4. Green Bay, Wisconsin. Average Credit Score = 780
3. Cedar Rapids, Iowa. Average Credit Score = 781
2. Madison, Wisconsin. Average Credit Score = 785
1. Minneapolis, Minnesota. Average Credit Score = 787

The 10 Worst
9. El Paso, Texas. Average Credit Score = 710
9. Tyler, Texas. Average Credit Score = 710
6. Las Vegas, Nevada. Average Credit Score = 709
6. Bakersfield, California. Average Credit Score = 709
6. Augusta, Georgia. Average Credit Score = 709
4. Shreveport, Louisiana. Average Credit Score = 706
4. Monroe, Louisiana. Average Credit Score = 706
3. Corpus Christi, Texas. Average Credit Score =702
2. Jackson, Mississippi. Average Credit Score = 701
1. Harlingen, Texas. Average Credit Score = 686

In 2010 one brave analyst took to 60 minutes to give deliver a warning message: municipalities are broke. Meredith Whitney made a very controversial call, declaring state and local governments a poor place to invest. In particular, she noted her expectations for the future of the municipal bond market which included hundreds of billions of dollars in defaults within the next five years.
A full year later, Meredith might want to rethink her prediction.
<h3>How Munis Performed in 2011</h3>
See the chart below of three popular municipal bond ETFs (more on <a href="http://www.high-yield-passive-income.com/municipal-bonds.html" target="_blank">municipal bond investing </a>options and the benefits of triple tax free investing):
<img src="http://i.imgur.com/Gk8LI.png" alt="municipal bonds, muni bonds, municipal bonds 2011" width="544" height="240" />
This chart includes:
<ul>
<ul>
<li>iShares S&amp;P National Municipal Bond ETF (<a class="ticker" href="/stock/mub#">MUB</a>) – Invested primarily in intermediate term issues, MUB looks for general obligation and sales tax revenue bonds for investor protection. The fund is invested largely in bonds with an A-rating or better by credit ratings agencies. MUB yields 2.86% to investors</li>
<li>SDPR Nuveen Barclays Municipal Bond ETF (<a class="ticker" href="/stock/tfi#">TFI</a>) – Barclay's created this lesser diversified, rules based index for municipal bond investors. The ETF owns bonds with Aa3/A- ratings or better from at least two of the three major ratings agencies including Moody's, Standard &amp; Poors', and Fitch. TFI yields 3.19% to investors.</li>
<li>iShares S&amp;P Short-Term National AMT-Free ETF (<a class="ticker" href="/stock/sub#">SUB</a>) – This fund was included for the fact that it sticks to the short end of the yield curve. The SUB ETF holds 25% of assets in short-term securities with maturity dates less than 1 year in the future. The remaining holdings are kept in bonds with less than 5 years to maturity. SUB yields 1.28% per year at the current price.</li>
</ul>
</ul>
<h3>Where Meredith Missed the Muni Market</h3>
Meredith missed horribly in her prediction. A quick look from the chart shows us the outsized capital gains for muni investors in the year-ago period. Atop this gain, however, investors also have very reasonable tax-free distributions.
So where did Meredith go wrong?
Here's just a few of the things she missed:
<ol>
<ol>
<li>Europe – You cannot have a conversation about the debt markets without addressing the international markets. Given that the PIIGS nations (an acronym which includes Portugal, Ireland, Italy, Greece and Spain) all face budget and debt woes, Americans naturally find the town next door to be a better investment than European Sovereigns.</li>
<li>Bernanke – Any investor knows not to fight the Fed.  We're finally seeing the strategy of <a href="http://www.etfbase.com/how-to-short-treasuries/" target="_blank">shorting Treasuries </a>paying off, but it's been fighting an uphill battle. Meredith Whitney made her call for troubled municipalities to default in December, just one month after another $600 billion quantitative easing program (dubbed QE2) rolled out to drive down yields. Given the Fed's capacity to deliver on lower interest rates (and thus higher bond values) one must question Whitney's timing.</li>
<li>Bottoming Real Estate Markets – Municipal bonds are very much tied to the fate of the real estate market. General obligation bonds backed by the full faith and credit of a municipality are the most directly related to property taxes. Luckily for state governments, US housing prices moderated to <a href="http://www.calculatedriskblog.com/2011/12/case-shiller-house-prices-fall-to-new.html">drop only slightly for the full year</a>, helped in part by a low interest rate environment and improving spreads between real estate cash flows and carrying costs. Trends look better for 2012, as a number of <a href="http://online.wsj.com/article/SB10001424052970204058404577110891819911670.html">builders exit the commercial markets</a> to begin building new residential real estate to grab yield.</li>
</ol>
</ol>
<h3>Fed Backstops Municipal Default</h3>
Most municipalities finance their obligations with long-term, callable bonds. Callable bonds are obviously favorable to the municipality and detrimental to investors in periods of falling interest rates.
Meredith Whitney may be right to say that municipalities have long term financing problems. It is true that most every government does eventually spend beyond its ability to finance ever-growing obligations. Municipalities face rising obligations to baby boomer workers through pensions and other investments. Certainly, pensions aren't meeting their “hurdle rate” to make good on future promises.
However, the same environment that crushes pension performance is enabling municipalities to fund their most pressing needs in the here and now. Call provisions allow municipalities to call higher yielding bonds issued over the last several years with new issues at lower and lower rates.
Do municipalities have a funding problem? Yes, and it would be a lie to deny the concern. However, Whitney's 5-year call is far too pessimistic – every municipality enjoys much lower borrowing costs today than it previously paid even five years ago.
Dear Meredith, don't fight the FED.
Written by: JT, who blogs about anything finance at <a href="http://moneymamba.com">MoneyMamba</a>.
Disclosure: No position in any ETFs reviewed in this article
©2012 <a href="http://www.etfbase.com">ETF Base</a>. All Rights Reserved.
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U.S. Consensus published the population data that they rigorously constructed throughout the summer. Michigan was the only state out of the 50 that had a decrease in population (along with a congressional seat) at a modest .6%, since the last time data was collected. Texas on the other hand, gained the most congressional seats and population.
What does this all mean?
How to trade it: Bonds, Bonds, &amp; More Bonds…
One could anticipate further tax revenue growth collected by the IRS in regions that had population increases. This allows smaller municipalities to have more capital to pay of long-term debts. Thus, muni bond solvency increases and they will maintain or attain higher credit ratings. 
Meanwhile, smaller municipalities in regions where Michigan received large deviations to the downside in population; will have less tax revenue. With less tax revenue, increased pressure to pay long term muni bond debt will occur if fiscal cuts at local levels does not occur.
For example, Pontiac, MI, muni bonds are in the top ten for highest yields to maturity. Indicating that the population is exporting elsewhere to places in coastal regions and southwest states. Along with Pontiac's “rust belt” stigma of fading auto manufacturing aids to the associated risk.
Also consider that fact that Michigan has over a 12% unemployment rate, and people have to migrate to achieve work. States in middle America such as Oaklahoma, Nebraska, Kansas, and South Dakota local municipalities have a lower unemployment rate which adds to low bond yields.
Ways to trade bonds
Easiest way for a retail investor to have exposure to bonds is with the recent upheaval in bond ETF's.
SPDR Lehman California Municipal Bond ETF (NYSE: <a class="ticker" href="/stock/cxa#NYSE">CXA</a>)
S&amp;P Short-Term National AMT-Free Municipal Bond Fund (NYSE: <a class="ticker" href="/stock/sub#NYSE">SUB</a>)
SPDR Lehman Municipal Bond ETF (NYSE: <a class="ticker" href="/stock/tfi#NYSE">TFI</a>)
SPDR Lehman New York Municipal Bond ETF (NYSE: <a class="ticker" href="/stock/iny#NYSE">INY</a>)
SPDR Lehman Short Term Municipal Bond ETF (NYSE: <a class="ticker" href="/stock/shm#NYSE">SHM</a>)
SPDR S&amp;P VRDO Municipal Bond ETF (NYSE: <a class="ticker" href="/stock/vrd#NYSE">VRD</a>)
Market Vectors Intermediate Municipal Index ETF (NYSE: <a class="ticker" href="/stock/itm#NYSE">ITM</a>)
Market Vectors AMT-Free Long Municipal Index ETF (NYSE: <a class="ticker" href="/stock/mln#NYSE">MLN</a>)
Pre-Refunded Municipal Bond Index ETF (NYSE: <a class="ticker" href="/stock/prb#NYSE">PRB</a>)
iShares Lehman 20+ Year Treasury Bond Fund (NYSE: <a class="ticker" href="/stock/tlt#NYSE">TLT</a>)
Aggressive Leveraged Bond ETF's
ProShares Ultra Short 20+ Year Treasury Bond ETF (NYSE: <a class="ticker" href="/stock/tbt#NYSE">TBT</a>)
Direxion 10-Year Treasury Bear 3X ETF (NYSE: <a class="ticker" href="/stock/tyo#NYSE">TYO</a>)
Direxion 10-Year Treasury Bull 3X ETF (NYSE: <a class="ticker" href="/stock/tyd#NYSE">TYD</a>)
Direxion 30-Year Treasury Bear 3X ETF (NYSE: <a class="ticker" href="/stock/tmv#NYSE">TMV</a>)
Direxion 30-Year Treasury Bull 3X ETF (NYSE: <a class="ticker" href="/stock/tmf#NYSE">TMF</a>)

Fixed-income giant PIMCO launched its third actively-managed ETF on Wednesday (2/3/2010) of this week. PIMCO Short Term Municipal Bond Strategy Fund (SMMU) targets the short end of the tax-free muni bond space. Maturity of the fund’s holdings will be in the one-year to three-year range.
Intentionally or not, the SMMU introduction is well timed. Talk in Washington of increasing tax rates has many high-net-worth investors looking for tax-free places to park their assets. Meanwhile, stock market performance is anything but impressive so far in 2010. SMMU will compete with three other ETFs in its niche: iShares S&amp;P Short-Term National Muni Bond (SUB), SPDR Barclays Short Term Municipal Bond (SHM), and Market Vectors Short Municipal (SMB).
SMMU differs from the others in being actively-managed. The portfolio will be run by veteran bond manager John Cummings. Whether his skill will translate into better investment results is unknown as yet, of course, but it may not matter. The PIMCO brand name carries a lot of weight, and their previous ETF offerings have been generally successful in attracting assets.
The new ETF has a gross expense ratio of 0.55%, currently capped by the sponsor at 0.35%. Sister fund PIMCO Intermediate Municipal Bond Strategy Fund (MUNI) has the same fee cap and <a href="http://investwithanedge.com/pimco-offers-new-active-bond-etf-muni" target="_blank">came to market in December 2009</a>. Net assets for MUNI are around $13 million as of this writing. We suspect that its lower risk profile will allow SMMU to grow to that size very soon and probably even larger.
<a href="http://www.pimcoetfs.com/FundInfo/Pages/SMMU.aspx" target="_blank">PIMCO SMMU info page</a> and <a href="http://www.pimcoetfs.com/SiteCollectionDocuments/PIMCO_Active_ETF_Prospectus.pdf" target="_blank">Prospectus (PDF format)</a>
<a href="http://investwithanedge.com/index.php?s=PIMCO" target="_blank">Other posts mentioning PIMCO ETFs</a>
Disclosure covering writer, editor, publisher, and affiliates: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.
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PIMCO Adds Short-Term Munis to ETF Menu: SMMU

PIMCO's Term Municipal Bond Strategy Fund (NYSE: SMMU), the third actively managed bond ETF from the fixed income giant, made its trading debut today.
The ETF is designed for investors looking for tax exempt income. SMMU uses a portfolio of highly rated short duration bonds that provides income that is exempt from federal taxes.
SMMU tracks the the Barclays Capital 1-3 Year Municipal Bond Index and will compete against the iShares S&amp;P Short-Term National Muni Bond Index Fund (NYSE: <a class="ticker" href="/stock/sub#NYSE">SUB</a>), the SPDR Barclays Short Term Municipal Bond ETF (NYSE: <a class="ticker" href="/stock/shm#NYSE">SHM</a>), and Market Vectors Short Municipal Index ETF (NYSE: <a class="ticker" href="/stock/smb#NYSE">SMB</a>).
Actively managed ETFs are expected to see impressive growth this year and PIMCO is planning at least two more related offerings.

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