SSGA makes changes to SPDR Nuveen muni bond ETF

Jan 4th, 2019 | By | Category: Fixed Income

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State Street Global Advisors (SSGA) has made changes to the SPDR Nuveen Bloomberg Barclays Municipal Bond ETF (TFI US) by adding a maturity cap to the index methodology.

Matthew J Bartolini, Head of SPDR Americas Research

Matthew Bartolini, Head of SPDR Americas Research.

TFI, which provides broad exposure to a variety of investment grade, US dollar-denominated municipal bonds, is currently the fourth largest muni bond ETF on the market with assets under management of $2.8bn.

As of 2 January 2019, the fund switched from tracking the Bloomberg Barclays Municipal Managed Money Index to the Bloomberg Barclays Municipal Managed Money 1-25 Years Index, thereby capping the maximum term to maturity of underlying constituents at 25 years.

The fund’s name, ticker symbol, and annual expense ratio remain unchanged and no action is required by shareholders.

The maturity cap serves to lower the duration profile of the index, a move that investors will likely find favourable considering expectations for future interest rate increases. The new index contains an option-adjusted duration of 6.9 years.

“Adding a 25-year maturity cap to the existing index methodology tailors the exposure for more precise access to the intermediate-term segment of the muni market,” said Matthew Bartolini, Head of SPDR Americas Research. “The duration profile will now be more in line with what clients consider intermediate, all the while still retaining the broad access to the muni-market clients have enjoyed, acting as a core muni position and complementing the other options in our suite.”

TFI comes with an expense ratio of 0.23%. The fund offers a current yield of 4.2%, and distributions are made to investors on a monthly basis.

The other funds in SSGA’s suite of muni bond ETFs include the $3.8bn SPDR Nuveen Bloomberg Barclays Short Term Municipal Bond ETF (SHM US), which targets the shorter end of the yield curve with a current index duration of 2.8 years; and the $700 million SPDR Nuveen S&P High Yield Municipal Bond ETF (HYMB), providing broad exposure to muni bonds that are rated below investment grade.

SHM has an expense ratio of 0.20%, while HYMB costs 0.35%.

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