An exchange traded fund to focus on the pre-refunded segment of the municipal bond market
US-based asset manager Van Eck Global has launched its Market Vectors Pre-Refunded Municipal Index ETF, an exchange traded fund to focus on the pre-refunded segment of the municipal bond market.
Market Vectors Pre-Refunded Municipal Index ETF (PRB) seeks to replicate before fees and expenses, the price and yield performance of the Barclays Capital Municipal Pre-Refunded Treasury-Escrowed Index (LMPETR). The fund’s total net expenses are 0.24%.
Pre-refunded munis are bonds that have been refinanced by their issuers in the municipal market. The principal and interest of the bonds that make up LMPETR, the index underlying the fund, are secured by the U.S. Treasury obligations backed by the credit of the U.S. government.
Those obligations include U.S. treasuries as well as state and local government series bonds, or SLGs, which are treasuries issued for escrow use by municipal issuers.
Jan van Eck, principal of Van Eck Global, said: Pre-refunded bonds, given their high credit quality, liquidity and relatively low levels of price volatility can truly be called munis for the risk averse. Their attractive taxable-equivalent yields and historical returns add to their appeal. PRB is a unique product that is well-suited to meeting investors’ needs in today’s difficult environment.