New ETFs provide access to US bonds

ETF Securities US bonds

ETF Securities has released two ETFs that will offer exposure to fixed income investments via US government and corporate bonds.

ETF Securities has leveraged the new resources available to the firm after its recent acquisition to launch two exchange-traded funds (ETF) that will offer exposure to fixed income investments via United States government and corporate bonds.

The new funds – the ETFS US Treasury Bond (Currency Hedged) ETF (ASX code: USTB) and ETFS USD High Yield Bond (Currency Hedged) ETF (ASX code: USHY) – are both hedged into Australian dollars and are being made available to Australian retail investors following the acquisition of ETF Securities by Mirae Asset and Global X ETFs in June.

The USTB will track the iBoxx $ Treasuries Total Return Index, which is market capitalisation weighted and tracks the performance of bonds issued by the US government.

ETF Securities noted the market for US government debt is the deepest and most liquid of any type of financial instrument with more than US$23 trillion of outstanding Treasuries, and despite the size of this market the USTB offering will be the first pure-play exposure to US Treasury bonds available to Australian retail investors.

The USHY will track the Solactive US Dollar High Yield Corporates Total Market Index and bonds in that index must be issued by companies based in developed market countries with at least US$1 billion outstanding face value.

ETF Securities head of product Evan Metcalf said fixed income investments had a key role in investment portfolios due to their low correlation to equity returns and lower volatility and the ability to provide yield with relatively low risk.

“Investors often compare the yield on government bonds to the higher yield on dividends from equities. What they ignore is that to capture that dividend yield they must invest in an asset class with double-digit annual volatility,” Metcalf said.

“These investment options are perfect for investors like retirees or SMSFs who are seeking peace of mind and low-risk asset classes.”

ETF Securities head of distribution Kanish Chugh said the firm would continue to offer new ETFs and the launch of these two funds was the start of a new growth strategy following the Mirae Asset and Global X ETFs deal.

“We are excited to work with Global X ETFs and to dip into their vast research capabilities and experience. As a leading provider of ETFs we will continue to offer solutions for investors to build portfolios across the spectrum, whether it’s defensive, growth, income or alternatives,” Chugh said.

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