Thoughts on 2 new ASX listed US Fixed Interest ETF’s?

Hi David,

Obviously from a liquidity perspective its early days with both ETFS debuting on the ASX on Tuesday, however market makers will be there in the market.

ETFS US Treasury Bond (currency hedged) (USTB) $9.99 – this ETF aims to track the iBoxx $ Treasuries Index ($A hedged), in simple English to go long is to take a position that US bond yields will stay the same or decline, pushing the value of the security higher. e.g. the underlying iBoxx index is down -11.9% this year.

• The USTB invests in US Treasuries across the yield curve while providing currency hedging.
• The management cost 0.3% p.a. paid quarterly.
• The running yield on this security is 3%
• The performance will be dictated by the direction of interest rates.  If rates keep going up, this security will go down and vice versa.

ETFS USD High Yield Bond (currency hedged) (USHY) $10.10 – this ETF aims to track the performance of the Solactive USD High Yield Corporates Total market AUD Hedged index, again in simple English to go long is to take a position that US high yield corporate bond yields will stay the same or decline, pushing the value of the security higher e.g. the underlying Solactive index is down 13.8% this year.  NB – this is a higher risk security.

• The USHY tracks a basket (1204 in total) of high yield US dollar bonds issued by global companies.
• The management cost is 0.55% p.a. paid quarterly.
• The running yield on this security is 8.4%
• The performance will be dictated by the direction of interest rates, but also credit spreads, i.e. the pricing of risk over and above safe US Treasuries.

Overall, these securities will move in a similar direction while the USHY is likely to experience greater swings (higher Beta)  i.e. down when the cost of corporate debt rises and vice versa.

Both look solid securities, and we like the team at ETF Securities, they generally develop good vanilla offerings that are true to label.