It looks like iShares can add another “first” to its long list of industry accomplishments: the fund family will reportedly offer the first exchange-traded funds that track Mexican government debt indexes. According to a prospectus filed with the Mexican stock exchange, iShares will offer five ETFs, including funds tracking five- and ten-year peso bonds and local inflation-linked securities. ”These ETFs are going to be attractive because government bonds are heavily traded and are easier to follow than corporate debt,” said Daniel Gamba, Barclays Global Investors’ executive director for Latin America. The ETFs are scheduled to begin trading on the Bolsa exchange on July 16.
Unlike many countries that have seen interest rates pushed down in efforts to stimulate struggling economies, Mexican government bonds still offer attractive yields, recently rising above 8%. Yields on similar issues of government debt from other major countries are:
| Country | Yield |
|---|---|
| U.S. | 3.57% |
| U.K. | 3.80% |
| Germany | 3.37% |
| Japan | 1.34% |
| Mexico | 8.12% |
Inflation-protected securities have surged in popularity over the last year, as investors concerned about runaway inflation resulting from the massive stimulus packages implemented in the U.S. and around the country have sought out investment alternatives that provide a hedge during inflationary (or even hyperinflationary) times. U.S. investors have currently have multiple options for inflation-protected government bonds, including WIP and TIP. Since the interest payments on these instruments are positively correlated with inflation, they are more likely to provide a real return regardless of the level of inflation.
Disclosure: No positions at time of writing.
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