Default Risk Factor

TIPs and Broad Market Bond ETFs to Launch in Q4

Default Risk Factor

Two new bond ETFs are poised to launch this Fall following initial regulatory approval by the SEC, Barclays Global Investors announced. An inflation-protected Treasury fund and a broad market fund will help fill out fixed income choices for the iShares family of ETF.

"Our clients have been asking for more fixed income iShares since iShares launched the first four fixed income ETFs in July 2002, so we're please that the SEC has taken action," said Lee Kranefuss, CEO of BGI's Intermediary Business. The same benefits of transparency of price and holdings, ease of purchase, and modest fees are expected to be the same draw as for other iShares.

The iShares Lehman U.S. Treasury Inflation Protected Securities Fund will track the Lehman Brothers U.S. Treasury Inflation Notes Index that measures the performance of inflation protected public obligations of the U.S. Treasury, also known as "TIPS". These instruments are considered the ultimate safe haven. Not only are they impregnable from loss of face value (the U.S. Government would have to default), but they protect against loss of relative buying power due to inflation since the underlying TIPS are designed to rise in value along with standard federal inflation indexes.

The iShares Lehman U.S. Aggregate Bond Fund will be designed to track the dominant broad U.S. investment grade bond index that includes multiple asset classes and maturity ranges. This index is similar to an equity total market index and like its equity cousin can serve as an excellent "core" position in a bond portfolio. Lehman bond indexes are among the most widely used fixed income benchmarks.

The funds' annual expense ratios will be .2%. Barclays currently sells four bond ETFs, the only ones available to US investors as of August of 2003