Deutsche to cross-list emerging markets quality bond ETF on SIX

Aug 18th, 2017 | By | Category: Fixed Income

Deutsche Asset Management is to cross-list the db X-trackers iBoxx USD Emerging Sovereigns Quality Weighted UCITS (EUR Hedged) ETF (XQUE) on the SIX Swiss Exchange. The fund provides currency-hedged exposure to US dollar (USD) currency denominated tradable debt (bonds) issued by governments or central banks in emerging market countries.

Deutsche Asset Management is to cross-list the db X-trackers iBoxx USD Emerging Sovereigns Quality Weighted UCITS (EUR Hedged) ETF (XQUE) on the SIX Swiss Exchange.

Deutsche Asset Management is to cross-list the db X-trackers iBoxx USD Emerging Sovereigns Quality Weighted UCITS (EUR Hedged) ETF (XQUE) on the SIX Swiss Exchange.

The fund tracks the Markit iBoxx USD Emerging Markets Sovereigns Quality Weighted Index. Bonds are only eligible for inclusion if they have a minimum credit rating of ‘B’ and pay either no interest or a pre-determined rate of interest.

Bonds issued by countries with favourable fundamental economic indicators are assigned a higher representation in the index compared to countries with weaker economic fundamental indicators. All eligible emerging market countries are attributed scores derived from fundamental economic indicators such as gross domestic product (GDP) growth, rate of inflation, national reserves as a percentage of GDP, national debt as a percentage of GDP and a percentage of exports, default history and global competitiveness of the country. The scores are then used to determine the level of representation that bonds issued by each country will have in the index.

The index is rebalanced on a monthly basis and country weightings are re-allocated twice a year. Currently it consists of over 320 constituents from 45 emerging market countries with the largest weightings going to Turkey (10.2%), Indonesia (8.8%), Mexico (7.2%), Russia (6.3%) and Qatar (5.8%). The index’s yield-to-maturity is currently 4.3% but there is relatively high interest rate risk with an effective duration of 7.3 years.

The fund trades in euros and will generally physically hold approximately one-tenth of the underlying index in order to maintain its exposure. The value of its holdings are periodically hedged to mitigate the risk of adverse currency movements between the US dollar and the euro affecting fund performance.

XQUE has a total expense ratio (TER) of 0.55%. The fund is also available on Deutsche Borse’s Xetra.

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