State Street Adds New Corporate Bond ETF Options
June 20th 2012 at 1:30pm by Tom Lydon
Investment interest in fixed-income bonds and exchange traded funds has grown as wary investors remain uncommitted to the equities market. In response to the growing demand, State Street Global Advisors, the sponsor of the SPDR ETF line, launched two new corporate bond ETFs on Tuesday.
On June 19, the SPDR BofA Merrill Lynch Crossover Corporate Bond ETF (NYSEArca: XOVR) and the SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF (NYSEArca: EMCD) began trading.
XOVR tries to reflect the performance of the BofA Merrill Lynch US Diversified Crossover Corporate Index, which is comprised of U.S. dollar-denominated BBB and BB corporate debt. “Crossover” corporate debt includes corporate securities rated at break off point where the lower end of investment-grade debt and higher end of high-yield debt meet – to qualify, securities have to be rated BBB1 through BBB3.
The holdings are broken into a 50/50 weight of debt rated between BBB1 and BBB3 and bonds between BB1 and BB3. As of May 31, 3029 securities were in the Index.
As of May 31, the Crossover Corporate Bond ETF’s top holdings include Sprint Nextel, HCA Inc, Icahn Enter, Calpine Corp and Dish DBS. Sector allocatiosn include industrials 79.3%, financial 12.0% and utility 8.7%. XOVR has an expense ratio of 0.30%.
“Featuring potentially higher yields than most investment grade bonds and potentially less credit risk than most high yield issues, demand for crossover bonds is growing among financial advisors and investors during this extended low-yield environment,” James Ross, senior managing director and global head of SPDR Exchange Traded Funds at State Street Global Advisors, said in a press release.
EMCD tries to reflect the performance of the BofA Merrill Lynch Emerging Markets Diversified Corporate Index, which is comprised of U.S. dollar-denominated emerging market corporate senior and secured debt. The fund has an expense ratio of 0.50%.
As of May 31, the Emerging Markets Corporate Bond ETF has 454 holdings, with top components like Petroleos De Ven, Petrobras Intl, Petronas Cap, Petroleos Mexica and Vale Overseas. Country allocations include Brazil 19.7%, Russia 15.2%, Mexico 11.0%, UAE 6.6%, South Korea 6.0%, Hong Kong 5.4%, China 4.8%, India and Qatar 3.3%.
For more information on new product launches, visit our new ETFs category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.