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By Scott Burns | 03-03-2010 03:43 AM

Adding Diversification to Your Muni Bond Ladder

Municipal Bond ETFs with a set maturity date could help investors create a diversified muni bond ladder, says iShares' Dodd Kittsley.

Scott Burns: Adding diversification to your muni bond ladder. Hi there, I'm Scott Burns, director of ETF research. Joining me today is Dodd Kittsley, who's a director in the iShares Internal Analytics Group. Dodd, thanks for joining me.

Dodd Kittsley: Thanks very much for having me.

Burns: iShares recently launched some pretty unique and interesting products in the municipal bond ETF space. These funds are basically ETFs with kind of a maturity date. Let's talk about this a little bit.

Kittsley: Yeah. It's a product that we're very excited about. We heard in the marketplace that there was significant demand from folks who traditionally ladder bonds, and they were looking for a diversified, cost effective, efficient way of complementing their ladders. So our product team put together a series of six products, six muni ETFs with termination dates starting in 2012, going to 2017. They mature each year in August. It really helps folks meet specific liabilities, be able to access specific parts of the municipal curve that they find attractive, or lack of inventory.

So we're starting to see folks use them as complements to ladders or to meet specific liability needs.

Burns: I think that lack of liquidity or even availability right now of municipal bonds is becoming a very key issue. A lot of that being driven by the new issuance of Build America bonds and things like that. Investors, what kind of liquidity can the expect from these targeted dated, I guess target date's not the right word, but these end date municipal bonds?

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