After vacuuming around $42 billion over the past 12-months, it’s been a good year for managers of bond ETFs.
The credit market is slowly returning to some semblances of normal, which has rebuilt confidence. Several bond managers have added bond ETFs to fill gaps in their product lineup.
BlackRock introduced the iShares 10+ Year Credit Bond Fund (CLY) and the iShares 10+ Year Government/Credit Bond Fund (GLJ).
CLY tracks the BofA Merrill Lynch 10+ Year US Corporate & Yankees Index, which is designed to measure the performance of the long-term, investment-grade U.S. corporate and Yankee bond markets. Component securities include debt issued publicly by U.S. corporations and U.S. dollar-denominated, publicly-issued debt of non-U.S. corporations, foreign governments and supranational agencies.
GLJ follows the BofA Merrill Lynch 10+ Year US Corporate & Government Index. It’s tied to the performance of the long-term, investment-grade U.S. corporate and government bond markets. Bonds inside the fund include publicly-issued U.S. Treasury debt, U.S. government agency debt, debt issued by U.S. and non-U.S. corporations, foreign government debt and supranational debt.
In December, BlackRock completed its merger with Barclays Global Investors and its iShares business. The combined firm now operates under the BlackRock name. Barclays Bank will continue managing its 30 iPath ETNs with around $5.5 billion in assets. According to the prospectus, both iShares bond funds have annual expense ratios of 0.20 percent.
In other bond ETF news, State Street Global Advisors has just added the SPDR Barclays Capital Short Term Corporate Bond ETF (SCPB) to its ETF lineup.
SCPB is linked to the price and yield of the Barclays Capital US 1-3 Year Corporate Bond Index, which includes corporate issues that have a remaining maturity of greater than or equal to one year and less than three years, are rated investment grade (average A2/A3 credit rating), and have $250 million or more of outstanding face value.
“As investors look to improve the diversification of their fixed income holdings, demand for precise access to the corporate bond duration curve has increased,” according to Anthony Rochte, senior managing director at State Street Global Advisors.
“The SPDR Barclays Capital Short Term Corporate Bond ETF can help investors position their portfolios for a potential increase in interest rates, as short-term corporate bonds are historically less sensitive to interest rate movements than longer term issues,” he adds.