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%.