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Mortgage-Backed Securities ETFs Are Making A Big Comeback

Yesterday, we spoke about healthy inflows in a Treasury Bond ETF GOVT (iShares Core U.S. Treasury Bond, Expense Ratio 0.15%, $2.8 billion in AUM, over $735 million in), and the activity is not confined to just this fund.

Several Vanguard Fixed Income funds have been active this week in terms of attracting new monies as well including BSV (Vanguard Short-Term Bond, Expense Ratio 0.10%, $19.5 billion in AUM, over $1.3 billion in), VCIT (Vanguard Intermediate-Term Corporate Bond, Expense Ratio 0.07%,$11.4 billion in AUM, over $835 million in), and BIV (Vanguard Intermediate Term Bond, Expense Ratio 0.10%, $11.2 billion in AUM, over $425 million in) and MBB (iShares MBS, Expense Ratio 0.27%, $9.2 billion in AUM) has also pulled in more than $585 million.

These are sizable inflow amounts for all of the aforementioned funds and reflect a noticeable buying trend toward various segments of the Fixed Income market early in 2017 including Government bonds, Corporate Bonds, and in the case of MBB here, even Mortgage Backed bonds.

MBB is the largest fund in that specific Fixed Income sub-category, and more than three times larger than the closest competitor in the space, VMBS (Vanguard Mortgage-Backed Securities, Expense Ratio 0.07%, $3 billion in AUM). After these two funds, there is a steep drop-off across the rest of the funds categorized here in asset sizes, as we see funds like LMBS (First Trust Low Duration Opportunities, Expense Ratio 0.65%, $374 million in AUM), MBG (SPDR Barclays Capital Mortgage Backed Bond, Expense Ratio 0.20%, $318 million in AUM), CMBS (iShares CMBS, Expense Ratio 0.25%, $216 million in AUM), GNMA (iShares GNMA Bond, Expense Ratio 0.15%, $163 million in AUM), and MBSD (FlexShares Disciplined Duration MBS, Expense Ratio 0.20%, $32 million in AUM), which clearly have significantly lower levels of invested assets currently.

It would make sense however to keep even these lesser known funds on the dashboard in the present however given the recent appetite for MBB in the marketplace, especially for those looking for specific exposures to the Mortgage Backed market here given the rise in interest rates.


The iShares Barclays MBS Bond Fund (NYSE:MBB) was trading at $106.17 per share on Friday morning, up $0.05 (+0.05%). Year-to-date, MBB has declined -0.16%, versus a 2.43% rise in the benchmark S&P 500 index during the same period.

MBB currently has an ETF Daily News SMART Grade of B (Buy), and is ranked #3 of 8 ETFs in the Long-Term Bond ETFs category.

Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.

About the Author: Paul Weisbruch

paul-weisbruchPaul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and for instance.

He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.

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