DB X-trackers launches world’s first range of North American corporate credit ETFs

Jun 14th, 2012 | By | Category: Fixed Income

DB X-trackers, Deutsche Bank’s ETF platform, has launched a range of ETFs designed to provide financially sophisticated investors with exposure to North American high yield and investment grade credit indices.

DB X-trackers launches world’s first range of North American corporate credit ETFs

“By providing access to these indices in ETF format we are opening up parts of the corporate credit market that are not easy to trade, even for large institutional investors”, said Manooj Mistry, Head of DB X-trackers, UK.

The London-listed ETFs, which are the first of their kind globally, let institutional investors take pure credit risk exposure – as opposed to the credit plus interest rate risk generated through investing in corporate bond indices – to the North American corporate credit market. The ETFs track the performance of the Markit CDX North America Investment Grade and Markit CDX North America High Yield credit default swap (CDS) indices.

The suite of products (see below) gives investors the flexibility to take long exposure to liquid US corporate credit risk, or to hedge their credit risk using the daily short versions of the ETFs, while daily leveraged exposures can also be taken.

“By providing access to these indices in ETF format we are opening up parts of the corporate credit market that are not easy to trade, even for large institutional investors. ETFs offer a liquid and hassle free route to taking these exposures, while investors will also benefit from the usual competitive fees and high levels of transparency associated with db X-trackers ETFs,” said Manooj Mistry, head of db X-trackers for the UK. “Our range of daily short ETFs meanwhile aims to provide those investors holding a portfolio of investment grade or high yield bonds with a tool for hedging their positions against market drawdowns.”

The CDS market is generally seen as the most liquid way to receive exposure to the corporate credit market. The investment grade index references 125 of the most liquid investment grade North American CDS securities, while the high yield index references 100 CDS securities, again chosen on a liquidity basis.

db X-trackers launched its first ETFs designed to track the performance of European CDS-based credit indices in July 2007 – the db X-trackers iTraxx ETFs range. Since then it has continued to expand its credit ETF offerings.

ETF

Used by credit protection seller/buyer

TER

CCY

Ticker

db x-trackers II Markit CDX North America Investment Grade ETF

Seller

0.18%

USD

XLIG

db x-trackers II Markit CDX North America High Yield ETF

Seller

0.24%

USD

XH7Y

db x-trackers II Markit CDX North America Investment Grade Short Daily ETF

Buyer

0.18%

USD

XLIN

db x-trackers II Markit CDX North America High Yield Short Daily ETF

Buyer

0.18%

USD

XH7S

db x-trackers II Markit CDX North America Investment Grade 2x Daily ETF

Seller

0.28%

USD

XLID

db x-trackers II Markit CDX North America High Yield 2x Daily ETF

Seller

0.34%

USD

XDLH

db x-trackers II Markit CDX North America Investment Grade 2x Short Daily ETF

Buyer

0.28%

USD

XLI2

db x-trackers II Markit CDX North America High Yield 2x Short Daily ETF

Buyer

0.34%

USD

XH72

 

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