BlackRock launches US MBS ETF
BlackRock has launched Europe’s first ETF investing in high quality US mortgage-backed securities.
The new iShares US Mortgage Backed Securities UCITS ETF tracks the Barclays US MBS index, which is based individual fixed rate pools, ensuring diversification across factors such as sensitivity to interest rates and prepayment risk.
This UCITS fixed income ETF, which brings the total number launched by iShares to 88, physically replicates the index by buying its securities, offering access to AAA- rated mortgage-backed securities issued by three agencies backed by the US government with a total expense ratio of 0.28%.
A mortgage backed security (MBS) is made up of groups of mortgages which are securitised into a liquid and tradeable bond. The fund avoids the risk of sub-prime mortgages as its tracking index includes only high quality mortgages, whose securitised bonds are sponsored by a US government agency.
According to BlackRock, by tracking the US-agency backed MBS market, the fund provides access to the most liquid part of the securitised bond market, and the second most liquid US bond market after Treasuries.
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