By Michael Johnston, founder of ETF Database

NEW YORK ( TheStreet) -- Following a tremendously successful 2009 that saw more than $40 billion flow into fixed income ETFs, the number of bond ETFs is expected to increase significantly in 2010.

In what could be the first of many new product launches, iShares introduced a line of new municipal bond, or "muni," ETFs on Friday.

Unlike existing muni bond products that are generally diversified across maturities, the iShares S&P AMT-Free Municipal Series includes six funds with a planned-end date and targeted range of maturities.

The new funds include: iShares 2012 S&P AMT-Free Municipal Series ( MUAA), iShares 2013 S&P AMT-Free Municipal Series ( MUAB), iShares 2014 S&P AMT-Free Municipal Series ( MUAC), iShares 2015 S&P AMT-Free Municipal Series ( MUAD), iShares 2016 S&P AMT-Free Municipal Series ( MUAE) and iShares 2017 S&P AMT-Free Municipal Series ( MUAF).

Each of the funds in the series is structured as an open-end fund, which holds AMT-free, investment-grade and noncallable municipal bonds until the final months of its operations, when these bonds begin to mature and the portfolio transitions to tax-exempt cash and cash-like instruments.

These targeted new products have the potential to be extremely useful in a number of ways, allowing investors and advisors to fill in holes in fixed income portfolios and implement customized strategies.

Municipal bond ETFs have become increasingly popular in recent years. Currently, the ETF screener shows 20 muni bond funds with more than $6 billion in aggregate assets. The new iShares ETFs each charge an expense ratio of 0.30%, making them competitive with existing products.

Year Of The Bond ETF

Considering the huge cash inflows to fixed income ETFs in the last year, the relative paucity of bond ETFs (fewer than 100 funds) is a bit surprising. The expansion of iShares' muni bond platform could be the first of several new product launches this year. Claymore has filed for approval on a similar line of corporate bond funds, including 10 ETFs with specific maturities ranging from 2011 to 2020.

While the vast majority of fixed income ETF assets are allocated to total bond market funds -- BND and AGG have combined assets of more than $17 billion -- increasingly innovative and targeted products are seeing some success.

State Street's convertible bond ETF ( CWB ) has amassed more than $200 million and PowerShares' Build America Bond Portfolio ( BAB ) is quickly building assets as well. Expect several more product launches in 2010 as issuers race to establish market share in a rapidly expanding space.

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At the time of publication, Johnston did not have a position in any equities mentioned. Michael Johnston is the senior analyst and founder of ETF Database, a Web-based investment resource providing actionable ETF investment ideas and an ETF Screener for investors analyzing potential ETF investments. Johnston oversees ETF Database's free ETF Newsletter, one of the most popular sources for news and commentary focusing exclusively on the exchange-traded fund industry. Johnston also maintains and develops content for ETFdb Pro, a line of analyst reports and model portfolios designed to help investors utilize ETFs to meet their investment goals.

Johnston has completed the Chartered Financial Analyst (CFA) program, and obtained his bachelor's degree in finance from the University of Notre Dame. Prior to founding ETF Database, Michael worked in a private client service group performing valuations of companies operating in a wide range of industries.

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