Greece’s troubles are no secret, and once those are resolved, eyes may soon turn to the rest of the PIIGS, which are similarly troubled. The debt crises in these countries have already hit one exchange traded fund (ETF) in particular.
Standard & Poor’s Ratings Services has lowered its fund credit quality rating on the SPDR Barclays Capital International Treasury Bond ETF (NYSEArca: BWX). This simple statement does not end here. For the longer-term credit implications for all entities out there which have ties to weaker sovereign nations, this is not good news.
24/7 Wall Street says that the actual downgrade is probably more symbolic than anything else. Be aware that other downgrades may be coming for other ETF products and business entities that have high exposure to weak international credit. According to the S&P, they lowered the credit rating of BWX because of the exposure of about 11% of the fund’s total assets to ‘BBB’ rated bonds that remain eligible investments for the Global Treasury Ex-US Capped Index. [Beware of a Bond ETF Bubble.]
BWX has more than $1.1 billion inside its funds. If you track the PIIGS, 11.8% of the ETF is Italy, Greece is 4.32%, and Spain is 4.6%. [When to Buy Bond ETFs.]
For more stories about bond ETFs, visit our bond ETF category.
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.