Best day yet. Barclays MUB traded 134,000 shares worth roughly $13.4 million dollars. SSGA’s TFI traded 192,900 shares worth roughly $4.2 million dollars. Lots of small trades indicating sticky assets and legit retail. Issuers and Specialists are very encouraged. Of note is the narrow bid/ask spread, 2-3 cents on TFI and 5-6 cents on MUB.
Archive for September, 2007
Municipal Bond ETFs 9/18/2007
Published September 19, 2007 Exchange Traded Funds-Creation Leave a CommentMunicipal Bond ETFs Week Two
Published September 17, 2007 Exchange Traded Funds-Creation Leave a CommentVery quiet day in anticipation of the Fed tomorrow.
In spite of the malaise in the market, MUB(Barclays) had volume of 27,300 shares totalling $2.7 million dollars(remember pricing at $100).The competing SSGA product, TFI, which launched 3 days after Barclays, had composite volume of 93,000 shares with 76,100 shares trading on the Amex(Primary) and 16,900 shares trading away. With a price of $22 this amounted to $2.04 million dollars. The combined total of $4.74 million dollars is very encouraging given the combined starting Specialist seed of $40 million. Of particular note is that the bulk of the trades appear to be small amounts indicating that true retail is involved from the start. This is encouraging for the 16 products scheduled to follow over the next six weeks. A very good start.
MUB had 15,600 shares trade today. New (day 1) TFI from State Street had 42,000 shares trade. Both respectable amounts. If the numbers hold up it would bode well for the 16 or so Muni ETFs that follow these first two. When comparing these two volume numbers one should bear in mind that MUB(Barclays) trades at around $100 while TFI trades at $22. Number of shares TFI wins, dollar amount traded MUB wins.
And a better day again. Trading volume 63,300 shares. The second test of this new crop of ETFs starts tomorrow with the SSGA National Municipal Bond ETF trading as TFI on the Amex. With MUB priced at $100 and TFI priced at $20 it will be of interest to see if the lower priced product attracts a different clientele.
MUB sold very well today with volume on the Amex of 43,500 shares. It will be interesting to see how the SSGA product, TFI will do when it launches on Thursday. If both sell well it would bode well for the 16 municipal ETFs that follow. Note the difference in structure between the Barclays and State Street Products. Of note is the structure of the coming VanEck product. By all accounts a different and neat structure.
My Bad-misread the numbers and wrote what I thought was logical. Seed on MUB was $294 million not $29 million. Bets are the Specialist didn’t provide the whole thing.
MUB from Barclays-volume 14,700 shares. Initial seed $29 million. Moving $1.4 million day one is very respectable.
Barclays stole the march on SSGA, Van Eck and Powershares by launching MUB this morning on the Amex. Early volume is encouraging at 5,200 shares. Expect SSGA to launch later in the week. With many products still to launch we hope for early successes from all.
When it rains it pours. There are currently a total of 18 new Municipal Bond ETFs coming from 4 different issuers. Barclays, SSGA, Van Eck and PowerShares are each coming with both a California and a New York ETF.
These make sense in that both states have large populations and high individual tax rates. All four issuers are taking aim at the multitude of Nuveen Bond Funds. The concept makes sense in that individuals investing in Municipal Bonds often pay a premium for small denominations and sell at a discount if they hold small pieces.
The question is whether the market(read Specialists) can absorb and resell this many ETFs in a reasonable time frame.
First to market may have the advantage. As an ex-Municipal Bond trader(in another life) I will be interested in seeing how this plays out.
The coming calendar of ETFs is fast becoming clogged. With fewer Specialists or Lead Market Makers willing to commit large amounts of seed, Issuers are having to look for alternative sources. Many issuers are accepting much lower initial seed amounts and are then hoping for fast sales to create AUM through subsequent creations.
We are starting to see issuers examine providing their own seed. In addition we are seeing some outside investors pairing with Specialists to provide seed money as a payment for other pieces of business, most typically commission payments on the underlying brokerage.
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