Global X has responded to the increasing demand for fixed income assets by launching a United States corporate bond exchange-traded fund (ETF) in Australia, providing investors with access to the world’s largest corporate bond market.
The Global X USD Corporate Bond ETF (Currency Hedged), which carries the Australian Securities Exchange code USIG, will track the Bloomberg USD Liquid Investment Grade Corporate Hedged to AUD Index and will offer access to US investment-grade corporate bonds. The ETF has a management fee of 30 basis points.
Global X head of investment strategy Blair Hannon said USIG will offer investors a consistent income from US investment-grade corporate bonds, which have higher yields than US treasuries and provide a favourable risk-adjusted return.
“Only a month ago, US 12-month treasuries were paying more than 5 per cent for the first time since 2001, yet with the recent market dislocation we’ve seen these rates compress back towards 4.50 per cent. This is where US investment-grade bonds can shine because they have a low correlation to equity markets – for instance, a 28 per cent correlation to the S&P 500, according to Bloomberg,” Hannon said.
“Investment-grade bonds strike a balance between risk and reward – offering proportionately higher yields than US treasuries, but lower yield potential than riskier high-yield bonds. Therefore, to build up your portfolio’s resilience and yield potential, you could consider having multiple US bond ETFs in your investment mix.”
The move comes on the back of an expansion into the Australian market and marks the fourth product release for Global X in 2023, bringing its total offerings of ETFs to 31.
Australian investors have had limited access to US corporate bonds in the past because of regulatory restrictions and a lack of familiarity with the corporate bond market in the US, and Global X stated the launch of USIG will open access the world’s largest corporate bond market, which has over US$10 trillion in outstanding debt and saw US$1.2 trillion worth of investment-grade bonds issued in 2022.