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State Street Global Advisors (SSgA) has expanded its range of short-maturity bond ETFs with the launch of the SPDR Barclays 0–5 Year Sterling Corporate Bond UCITS ETF (SYBQ) on the Deutsche Börse (Xetra).
The fund, which is linked to the Barclays 0-5 Year Sterling Corporate Bond Index, enables investors to participate in the performance of fixed income corporate bonds with a maturity of up to five years.
The index includes only investment-grade bonds, denominated in British pounds, from companies in the industrial, utilities and finance sectors. The index typically has around 220 constituents and is reviewed monthly.
As of 31 January, 2014, major constituents included Rabo Bank, UBS, Merrill Lynch, HSBC, Roche, ING, Vodafone, Anheuser-Busch Inbev and Citigroup. Financials had the largest representation with 51.53%, followed by industrials with 38.62% and utilities with 9.84%.
Short maturity ETFs can be used to over/underweight specific regions and currencies and build more bespoke exposures across the yield curve. Short maturity corporate indices tracked by SPDR ETFs hold all bonds until maturity, which has the effect of lowering duration and portfolio turnover while maintaining diversification.
Commenting on the launch, Eleanor Hope-Bell, head of SPDR UK at SSgA, said: “Higher coupons from corporate bonds helped offset some of the negative impact of rising gilt and treasury yields in 2013. In the current environment, with speculation growing that the interest rates cycle is turning, short-maturity ETFs should be a useful tactical tool, allowing investors to earn yield while remaining flexible.”
She added: “We are delighted to launch the SPDR Barclays 0–5 Year Sterling Corporate Bond UCITS ETF as part of our short maturity bond suite. The SPDR range offers our investors diversified, liquid access to the short end of the government, investment grade and high yield corporate yield curves in one simple trade and allows for flexible cost-efficient ways to adjust duration within a portfolio, by replacing or blending with standard all-maturity exposures.”
There are now 55 SPDR ETFs available across Europe. The new short-maturity sterling corporate bond ETF follows the recent launch of four other short-maturity ETFs, the SPDR Barclays 0-3 Year US Corporate Bond UCITS ETF (SUSD); the SPDR Barclays 0-3 Year Euro Corporate Bond UCITS ETF (SEUE); the SPDR Barclays 1-3 Year US Treasury Bond UCITS ETF (TSY3) and the SPDR Barclays 0-5 Year US High Yield Bond UCITS ETF (JNKS).
Worldwide, SSgA offers more than 1956 ETFs with assets of nearly $400 billion.
The new fund has a total expense ratio (TER) of 0.20%.