President Obama has just cut a deal with congressional Republicans to prolong the tax cuts implemented by George W. Bush for all Americans regardless of income. In return, congressional leaders have agreed to extend unemployment benefits and cut payroll taxes.

But most investors probably didn’t notice that the Build America Bond (BAB) program doesn’t appear to be part of this freshly inked agreement and might expire at year’s end.

More than $174 billion worth of these taxable municipal bonds have been issued since the program was enacted, making it the fastest growing corner of the municipal bond market over the past two years. These bonds have been extremely popular with municipalities because the federal government assumes part of their financing costs. But several prominent Republicans have branded the BAB program as wasteful stimulus spending.

Media reports on the future of BABs have been unsourced, so the program may not necessarily be on death watch. But there’s still good reason to avoid BAB-related exchange-traded funds (ETF) such as PowerShares Build America Bond Portfolio (NYSE: BAB). Republicans are negotiating from a position of strength, so it’s a long shot that the program will be extended.

What’s New

Despite a mid-November lull in new issues, a swarm of products came to market last week. The offerings run the gamut from emerging market-focused and volatility-linked exchange traded notes (ETN), to new financial ETFs and both equity and fixed-income products. With almost two dozen new ETFs on the market, I’ll focus on the most interesting offerings.

Starting with bond funds, BlackRock launched iShares Barclays 0-5 Year TIPS Bond Fund (NYSE: STIP), a short-term Treasury Inflation Protected Securities (TIPS) fund.

This is an ingenious innovation in a space that’s been largely dominated by me-too funds. However, there is already one similar fund on the market, PIMCO 1-5 Year US TIPS Index (NYSE: STIPZ), which requires holdings to have at least one year and not more than five years left to maturity.

As is the case with all bonds, TIPS are sensitive to changes in interest rates, and rising rates almost always accompany rapid inflation. While holding TIPS can protect you from hyperinflation, these investments may only break even because of the eroding effect of a tighter monetary policy. Investing in TIPS with only a short time left to maturity should provide significant insulation against interest rate risk.

While the fund lacks the size and volume to win my recommendation, it is a novel concept.

The second fixed-income fund to come to market this week is Peritus High Yield ETF (NYSE: HYLD). I don’t find this actively managed high-yield bond fund particularly compelling.

I’m frankly unimpressed with the actively managed funds I’ve seen launched recently. Some of the most alluring characteristics of ETFs are their transparency and low costs, and most new actively managed ETFs fail to deliver on both fronts. In this case, Peritus High Yield charges an annual expense ratio of 1.35 percent and is close-lipped about its holdings. I can think of several excellent mutual funds that are cheaper and also boast attractive long-term track records.

Invesco PowerShares Capital Management launched a new suite of financial ETFs, including:

• PowerShares KBW High Dividend Yield Financial Portfolio (NYSE: KBWD)
• PowerShares KBW Property & Casualty Insurance Portfolio (NYSE: KBWP)
• PowerShares KBW International Financial Portfolio (NYSE: KBWX)
• PowerShares KBW Premium Yield Equity REIT Portfolio (NYSE: KBWY)

KBW Premium Yield Equity REIT Portfolio and KBW Property & Casualty Insurance Portfolio will be dividend-weighted; the companies that pay the highest dividends will receive a larger exposure in the portfolio.

KBW High Dividend Yield Financial Portfolio doesn’t grab my attention; I think we’ve all learned over the past years to be leery of high yields in the financial space. But I do like KBW Premium Yield Equity REIT Portfolio because real estate investment trusts (REIT) are fundamentally sound and offer attractive yields. I’m also intrigued by KBW International Financial Portfolio because it will invest in non-US banks and insurers, many of which sport favorable growth potential.