S&P said in a statement that it had lowered the rating because of exposure of about 11% of the ETF's total assets to BBB-rated bonds that remain eligible investments for the Global Treasury Ex-US Capped Index, the benchmark the fund tracks. An S&P analyst declined to reveal any of the fund's specific country exposures. However, the SPDR Web site showed that as of March 29, 2010, BWX included a 4.3% country weighting in Greece. It also had weightings of 4.6% in Spain and 11.6% in Italy.
The Global Treasury Ex-US Capped Index includes government bonds issued by non-U.S. investment-grade countries in local currencies that have a remaining maturity of at least one year and are rated investment grade or above using the middle rating of S&P, Moody's and Fitch. The index is market-cap weighted, and the securities in the index are updated on the last business day of each month.
BWX, which holds cash bonds, is passively managed by the fund's advisor, SSgA Funds Management, a wholly owned subsidiary of State Street Corp. It is designed to track the total return performance of the underlying index. From its inception in October 2007 through February, BWX produced an annualized return of 6.9%.
S&P's fund credit quality rating scale ranges from the highest level of protection, AAAf, to the lowest protection, CCCf. Inclusion of a plus or minus sign indicates relative standing within the major rating categories. Volatility ratings range from lowest volatility, S1, to highest volatility, S6.
Michael S. Fischer (firstname.lastname@example.org) is a New York-based financial writer and editor and a frequent contributor to Wealth Manager.