German Bond ETPs to Capitalize on the ECB's Aggressive QE

German bond-related exchange traded products are strengthening, with benchmark German bund yields dipping to record lows, as the European Central Bank expanded its bond purchasing program, pressuring yields on fixed-income assets across the board.

Year-to-date, the DB German Bond Futures ETN (NYSE Arca: BUNL), which tracks the DB USD Bund Futures Index, rose 41.5% and the leveraged DB 3x German Bond Futures ETN (NYSE Arca: BUNT), which tries to reflect the three times or 300% daily performance of the German bonds, gained 19.9%.

The outperformance of BUNL may reflect the huge demand for the investment product as the ETN currently trades at a 42.4% premium to its net asset value, whereas BUNT is trading at a -2.6% discount to its NAV, according to Morningstar data. ETNs may experience steep premiums to their NAV if the issuer suspends creations of ETN shares.

Additionally, the ProShares German Sovereign/Sub-Sovereign ETF (NYSEArca: GGOV), which is comprised of investment-grade sovereign or sub-sovereign bonds, excluding corporate debt, increased 6.5% year-to-date.


German bonds continued to strengthen Friday, with yields on benchmark 10-year German bunds hitting fresh record lows of 0.011%, compared to 0.6% at the end of last year, reports reports Min Zeng for the Wall Street Journal.

Related: ECB Buying Spree Helps Lift U.S. Corporate Bond ETFs