ETFdb Logo
ETFdb Logo
ETFdb Logo
ETFdb Logo
  • Channels
    • Active ETF
    • Alternatives
    • Beyond Basic Beta
    • China Insights
    • Climate Insights
    • Commodities
    • Core Strategies
    • Crypto
    • Disruptive Technology
    • Dividend
    • Dual Impact
    • Emerging Markets
    • Energy Infrastructure
    • Entrepreneur ETF
    • Equity ETF
    • ESG
    • ETF Building Blocks
    • ETF Education
    • ETF Strategist
    • Fixed Income
    • Future ETFs
    • Gold & Silver Investing
    • Innovative ETFs
    • Institutional Income Strategies
    • Leveraged & Inverse
    • Managed Futures
    • Modern Alpha
    • Multi-Asset
    • Multi-Factor
    • Nasdaq Investment Intelligence
    • Portfolio Strategies
    • Retirement Income
    • Smart Beta
    • Thematic Investing
    • Volatility Resource
  • Database
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Sector Tracker Tool
    • ETF Database Categories
    • Head-To-Head ETF Comparison Tool
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
    • Indexes
    • Mutual Fund To ETF Converter
    • ETF Data for Journalists
    • ETF Nerds
  • Research
    • First Bitcoin ETF
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
    • ETFs Future-Forward 2021: An iShares Investing Symposium
    • Three Themes for 2021: An iShares & MSCI Investing Symposium
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Videos & Podcasts
    • ETF 360 Video Series
    • ETF Trends on Videos
    • ETF Trends on Podcasts
    • ETF Prime Podcast
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. Are Sovereign Bond ETFs Headed Higher?
News
Share

Are Sovereign Bond ETFs Headed Higher?

Justin KuepperFeb 19, 2016
2016-02-19

Sovereign bonds have been top performers since the beginning of the year as investors sought shelter from troubled equity markets. As seen on our International Government Bonds ETFs list, all eight international government bond ETFs posted positive returns so far this year. The top performer posted a 4.7% gain, while the worst performer posted a 0.2% gain. By comparison, the S&P 500 SPDR (SPY A) has lost more than 5% so far this year, as of February 18.

While the Federal Reserve decided to hike interest rates late last year, the rest of the world seems committed to keeping interest rates exceptionally low. The Bank of Japan joined the European Union in pushing interest rates below zero in an attempt to stimulate its economy, while no other major developed economy has raised interest rates quite yet. These low interest rates have pushed yields down and have raised the prices of international bonds and bond funds.

Top Performers

The top performer has been the S&P Citi Group International Treasury Fund (IGOV A+), which jumped 4.7% so far this year. With 655 different holdings, the fund is well-diversified across regions like Denmark, Ireland, Sweden, Japan, Belgium, and other areas around the world. The portfolio has mixed maturity dates and holds primarily creditworthy bonds with AAA, AA, A, and some BBB and BB ratings.


Content continues below advertisement

Bond Credit Quality and Maturity Breakdown

Investors looking for the broadest exposure to international sovereign debt should stick with the IGOV ETF given its significant diversification across countries and debt attributes.

The ProShares Germany Sovereign/Sub-Sovereign ETF (GGOV B+) was another great performer with a 3.5% return so far this year. With only modest assets of less than $4 million, investors should carefully consider the liquidity of the ETF compared to the $500 million IGOV ETF. Mario Draghi’s comments that the European Central Bank would consider further easing measures could send German bonds higher, however, which makes the ETF worth watching.

Future Yields

Most investors know that bond prices are the inverse of yields, which means that prices go up only when yields go down. With yields in negative territory, the question becomes how much further bond prices can go up – the upside could be limited by monetary policy limits.

Short-term interest rates are close to zero or negative in most of the developed world, while the scope for adding further quantitative easing is limited. Central bank balance sheets have been propped up by more than 20% of GDP through quantitative easing efforts, but inflation remains below the 2% goal that many of these banks are targeting. Many economists believe that additional easing efforts could have little or no impact on inflation with rates already this low.

That said, many developed markets are in uncharted waters when it comes to unconventional monetary policy and many of the recent moves have been driven by market panic rather than interest rates. In early February, bonds around the world rallied as near-panic set in, with Japanese bonds moving into negative territory. Future yields may in part depend on the level of volatility and panic in other asset classes, including battered global equities.

The Bottom Line

Sovereign bonds have been among the top performers around the world, outpacing equities by a 10% margin since the beginning of the year in some cases. In general, these movements are driven by ongoing easing around the world and a flight to safety amid cratering equity markets. Future monetary policy options may be limited, but market panic could lead yields to move even lower and bond prices to rally over the coming months.

» Popular Pages

  • Tickers
  • Articles

May 16

Steering Retirees Through the Great Resignation

May 16

ETF Leaders Powered by the NYSE: Darek Wojnar

May 16

Here are Morningstar’s Kapoor's Thoughts on Millennials

May 16

Palladium ETF Strengthens on Chances of Global Deficit

May 16

A Look at CLNR’s Investment Thesis

May 16

An Options Strategy for Current Turbulent Markets

May 16

Blockchain ETFs Head the Market Bounce

May 16

Midstream's Important Role in the Energy Transition

May 16

Does Your ESG Portfolio Identify Risks to Financials?

May 16

Electric Vehicles Gaining Market Shares, KARS Invests

QQQ

Invesco QQQ Trust

SPY

SPDR S&P 500 ETF Trust

VOO

Vanguard S&P 500 ETF

ARKK

ARK Innovation ETF

XLE

Energy Select Sector SPDR...

WEAT

Teucrium Wheat Fund

VIG

Vanguard Dividend...

VGT

Vanguard Information...

VNQ

Vanguard Real Estate ETF

VYM

Vanguard High Dividend Yield...


Content continues below advertisement

Loading Articles...
Help & Info
  • Contact Us
  • About Us
  • Mission Statement
  • Press
Tools
  • ETF Screener
  • ETF Analyzer
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Performance Visualizer
  • ETF Database Model Portfolios
  • ETF Database Realtime Ratings
  • ETF Database Pro
More Tools
  • ETF Launch Center
  • Financial Advisor & RIA Center
  • ETF Database RSS Feed
Explore ETFs
  • ETF News
  • ETF Picks of the Month
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Best ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Legal
  • Terms of Use and Privacy Policy
  • © ETF Flows LLC
Follow ETF Database
Follow ETF Database

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

Equity ETF Channel

Retirement Portfolio Redux: Is the 60%-40% Portfolio Dead?

Debbie CarlsonOct 22, 2020
2020-10-22

With the 10-year U.S. Treasury yield hovering below 1% and Federal Reserve Chairman Jerome Powell...

Equity ETF Channel

Portfolio Diversification Isn't Dead, It Was Just Sleeping

Debbie CarlsonOct 15, 2020
2020-10-15

Investors could be forgiven to think there was no reason to invest outside of the U.S. for the...

}
X