International Bond Market Widens Arsenal
In yet another attempt to broaden the vast array of exchange traded funds (ETFs) available to investors, State Street began trading the first ever international corporate bond ETF.
The SPDR Barclays Capital International Corporate Bond ETF (IBND), which tracks the Barclays Capital Global Aggregate ex-USD > $1B: Corporate Bond Index, carries an expense ratio of 0.55% and gives investors exposure to debt that is denominated in local currencies.
IBND focuses on investment-grade corporate bonds and gives exposure to the following currencies: Euro, Australian Dollar, Canadian Dollar, New Zealand Dollar, British Pound, Japanese Yen, Swiss Franc, Swedish Krona and the Danish and Norwegian Krone. Although IBND excludes US Dollar-denominated bonds, it does include bonds issued by US companies which are payable in other currencies. In fact, according to the fund’s prospectus, the US has the largest country weighting at 17.5%, followed by Germany at 16.1% and the United Kingdom at 12.5%.
In regards to sector weightings, IBND is heavily focused on financials, industrials and utilities, which constitute 46.9%, 39.5% and 11.6% of its asset base, respectively. Additionally, the underlying index that IBND seeks to track boasts a yield of 3.05%, which can be expected if IBND tracks its underlying index accurately.
Of the holdings in the newly traded ETF, all the bonds in the fund are rated Baa or higher, with nearly half of them carrying a rating of A or better and the average maturity for the bonds is 5.3 years with a modified adjusted duration is 4.4 years.
Another notable mention regarding the international bond market is that PowerShares has also filed the necessary paperwork to launch the International Corporate Bond Portfolio (PICB), which will seek to replicate the performance of the S&P International Corporate Bond Index and give exposure to international corporate bonds.