Those old Europe worries just won’t go away, and today, they’re taking down global exchange traded funds (ETFs) with them.
The European Central Bank has stepped forward to aggressively purchase bonds from the most troubled governments in an attempt to stem a contagion effect, says The Wall Street Journal.
The renewed concerns aren’t doing international ETFs any favor as investors take shelter in safe-havens such as gold and Treasury bonds. Getting hit hardest are Asia-focused ETFs, which are also hurting because of weak Chinese trade data:
- iShares MSCI Indonesia (NYSEArca: EIDO) and Market Vectors Indonesia (NYSEArca: IDX) are down more then 5% today.
- Market Vectors India Small-Cap (NYSEArca: SCIF) is down 3.5%
- iShares MSCI Philippines (NYSEArca: EPHE) and iShares MSCI Thailand (NYSEArca: THD) are down 3.3%
They’re getting hit harder than many of the Europe-focused ETFs; SPDR DJ Euro STOXX 50 (NYSEArca: FEZ) is down 1.4% so far today. International-bond funds with a heavy focus on Europe are holding their own, as well: iShares S&P/Citigroup International Treasury (NYSEArca: IGOV) and SPDR Barclays Capital International Treasury Bond (NYSEArca: BWX) are up modestly so far today.
The trouble has made the yields on such funds a bit more attractive: IGOV yields 3.12%, but BWX kicks off a 7.71% yield.
It’s not difficult to see how international debt could remain attractive to more intrepid investors; yields are rising as contagion fears persist.
Bear in mind that many feel Europe is still going to be in for it this year, and both funds have very heavy Europe exposure: IGOV has 47% of its weighting in Europe, while BWX has a 51.3% weighting.
To protect yourself, have a trend following strategy if you’re looking at any of these bond funds.
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.