ETF Spotlight on the ProShares USD Covered Bond ETF (NYSEArca: COBO), part of an ongoing series.
Assets: $6.6 million
Objective: The ProShares USD Covered Bond tries to reflect the performance of the BNP Paribas Diversified USD Covered Bond Index, which is comprised of the highest rated U.S. covered bonds
Holdings: CIBC (2.75%) 5.6%, UBS Ag London Brh Covered Bond (2.25%) 5.4%, Commonwealth Bk Australia (2.25%) 5.2%, Barclays Bk Plc (2.25%) 5.1% and Toronto Dominion Bank (1.625%) 5.0%.
What You Should Know:
- ProShares sponsors the fund.
- COBO has a 0.35% expense ratio.
- The ETF has 25 bond components, and the top 10 holdings make up 49.6% of the overall portfolio.
- Country allocations: Canada 37.7%, Australia 16.8%, Switzerland 10.4%, Norway 8.7%, Sweden 7.4%, France 7.1%, U.K. 5.2%, Netherlands 3.6% and Germany 3.1%.
- The fund has a modified duration of 2.95 years.
- COBO comes with a 0.71% 30-day SEC yield.
- The ETF is down 0.3% over the past month, up 1.4% over the last three months and down 0.8% year-to-date
- Covered bonds are a type of debt instrument issued by financial institutions that are secured by a segregated pool of financial assets, such as mortgages or public-sector loans.
- The covered bond holder has a senior, unsecured claim against the issuer, which is secured by the cover pool in the even of a default.
- This type of bond security is attractive for investors seeking high-quality, triple-A investments with decent yield.
Next page: The latest news
The Latest News:
- Marcus Schulte, head of European FIG DCM at Credit Suisse, said that covered bond issuance has declined 20% over the last year as peripheral banks seek out ways to free up balance sheets, reports Aimee Donnellan for Reuters.
- “Investors want to know what assets have already been pledged away,” Schulte said in the article. “Peripheral banks will still use the market, but until they overcome these challenges issuance will fall behind.”
- Instead, European banks are seeking capital and senior unsecured funding as credit spreads look more attractive.
ProShares USD Covered Bond ETF
For past stories in this series, visit our ETF Spotlight category.
Max Chen contributed to this article.