iShares Launches Two New Fixed Income ETFs

by on December 9, 2009 | ETFs Mentioned:

iShares, the world’s largest ETF provider, launched two new bond ETFs on Wednesday, the iShares 10+ Year Credit Bond Fund (CLY) and the iShares 10+ Year Government/Credit Bond Fund (GLJ). The two funds round out iShares’ fixed income ETF line by providing investors exposure to the back end of the yield curve. The two funds, both with an expense ratio of 0.20%, rebalance monthly and focus on bond issues that have at least 10 years left to maturity and a face value of at least $250 million.

NYSECLY  tracks the Bank of America/Merrill Lynch 10+ Year US Corporate & Yankees Index, a benchmark designed to measure the performance of the long-term, investment-grade U.S. corporate and Yankee bond markets. Securities in this ETF include debt issued publicly by U.S. corporations and U.S. dollar-denominated, publicly-issued debt of non-U.S. corporations, as well as foreign government debt and supranational debt. At the midpoint of the year, index consisted of more than 1,000 dollar denominated issues spanning the globe in both developed and emerging market countries.

The fund is mostly comprised of American debt, with 71.2% of the fund allocated to US securities. Among international issuers, Canada (5.8%) and Brazil (3.3%) account for the largest portions. By sector, a majority of assets are in industrials (56.7%), with financials coming in distant second at just under 20 percent. The fund has an average weighted time to maturity of almost 24 years with an average weighted coupon of 6.9%.

GLJ tracks the  Bank of America/Merrill Lynch 10+ Year US Corporate & Government Index, a benchmark designed to measure the performance of the long-term, investment-grade U.S. corporate and government bond markets. Securities in this ETF include publicly-issued U.S. Treasury debt, U.S. government agency debt, debt issued by U.S. and non-U.S. corporations, foreign government debt and supranational debt. At June 30, the index had almost 1,300 dollar denominated issues of supranational, national and corporate entities.

Although it invests in debt from countries around the globe, GLJ is heavily concentrated in American debt with 85.3% of the portfolio being allocated to US debt. The fund has a heavy weighting to sovereign debt with 41.2% of the fund allocated to such issues. Among the corporate debt securities, industrials receive the largest allocation, making up 29 % of the fund. The remainder is rounded up by double digit weighting in quasi and foreign government as well as financial bonds. GLJ has an average weighted time to duration of 21.6 years.

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Disclosure: No positions at time of writings.