China’s “government has generally bailed out bankrupt companies, preventing bonds from losing money. Also, the renminbi is among the most stable currencies, as the Chinese government largely pegs it to the dollar,” according to Barron’s.
KCNY, which launched in December, is off to a fast start with $31 million in assets under management in just two months on the market. KCNY, the first Chinese commercial paper ETF to list in the U.S., features an average maturity of just 128 days and a lineup comprised entirely of investment-grade holdings and tracks the CSI Diversified High Grade Commercial Paper Unhedged Index. [A Better Use of Cash With This ETF]
China’s flat yield curve increases the allure of KCNY, meaning investors do not need to take on the interest rate risk of long duration bonds to grab solid yields. Underscoring the opportunity with an ETF like KCNY, the three-month yield spread between Chinese and comparable U.S. government debt was 3.6% at the end of last year, according to KraneShares data.
Market Vectors ChinaAMC China Bond ETF
