ETF Spotlight on the SPDR BofA Merrill Lynch Cross Over Corporate Bond ETF (NYSEArca: XOVR), part of an ongoing series.
Assets: $25.8 million
Objective: The BofA Merrill Lynch US Diversified Crossover Corporate Index tries to reflect the performance of the U.S. Dollar denominated BBB and BB corporate debt from the U.S..
Holdings: Top holdings include CIT Group Inc 4.25 8/15/2017 0.9%, SLM Corp 6 1/25/2017 0.8%, NRG Energy Inc. 7.625 1/15/2018 0.7%, Chesapeake Energy Corp 6.625 8/15/2020 0.7% and Arcelormittal 5 2/25/2017 0.7%.
What You Should Know:
- State Street Global Advisors sponsors the fund.
- XOVR has a 0.30% expense ratio.
- The ETF has 433 components and the top ten make up 7.2% of the overall portfolio.
- Sector allocations include corporate industrial 66.0%, corporate finance 20.3% and corporate utility 13.3%.
- Credit quality includes A 0.8%, Baa 50.3% and below Baa 48.9%.
- XOVR has a 3.68% 30-day SEC yield.
- The fund has an adjusted duration of 5.76 years.
- The ETF is up 0.9% over the past month, up 1.6% over the last three months and up 0.9% in the past year.
- Crossover corporate debt refers to corporate bonds rated at levels where the lower end of the investment grade debt meets the high end of speculative grade debt.
- Basically, the bond fund holds debt with credit ratings around the Baa1 to Ba3, or BBB+ to BB- levels.
- “Crossover bonds have less credit risk than many high yield bonds, yet generally offer higher yields than most investment grade bonds,” according to John Keller, Portfolio Strategist, Global Fixed Income, and David Mazza, Head of Research, at State Street Global Advisors. “In addition, because higher yielding corporate bonds tend to have shorter maturities, crossovers may have less sensitivity to interest rate changes (i.e., lower duration) than higher rated bonds.”
- “This targets the portion of the U.S. Corporate bond market that has historically offered the best risk-adjusted returns as measured by Sharpe ratios,” the SSgA analysts added, refering to the BofA Merrilly Lynch US Diversified Crossover Corporate Index.
Next page: The latest news
The Latest News:
- According to Lipper data, high-yield funds saw $909 million in withdrawals in the week ended Jan. 30, reports Matthew Fuller for Forbes.
- Corporate borrowers with a less stellar credit rating sold $27.7 billion in debt this year, compared to $43.3 billion for the same period year-over-year, a 36% decline, Financial Times reports.
- The Markit CDX North American Investment Grade Index, a credit-default swaps benchmark used to hedge against losses or speculate on creditworthiness, rose 3.1 basis points to 74.4%, the highest level since November, reports Jessica Summers for Bloomberg.
- Swaps are rising due to weak manufacturing data, which decreased to 51.3 from 56.5 in December, the largest decline since December 1980.
SPDR BofA Merrill Lynch Cross Over Corporate Bond ETF
For past stories in this series, visit our ETF Spotlight category.
Max Chen contributed to this article.