“China’s high money market fund returns are driven from the country’s high risk free rate. China’s yield curve is also very flat and delivers attractive yields relative to US treasuries. A 3mo China government bond delivers 3.39% vs a 3mo US government bond at 0.01%…that’s a 3.38% spread,” KraneShares said on The Reformed Broker.
Investors are already noticing the advantages of KCNY over the traditional U.S. brokerage sweep program that is only moderately more rewarding than the free lollipops at the local bank branch. KCNY debuted earlier this month and already has over $22.4 million in assets under management. [Good Timing for These New ETFs]
The ChinaBond Commercial Paper Index is up nearly 38% over the past five years compared to a gain of just 1.55% for the S&P US Commercial Paper Index. As the chart below indicates, investors can harness KCNY’s yield advantage without fear of significant downside deviations.
Chart Courtesy: KraneShares