ETFdb Logo
ETFdb Logo
  • ETF Database
  • Channels
    • Themes
      • Active ETF
      • Artificial Intelligence
      • Beyond Basic Beta
      • China Insights
      • Climate Insights
      • Core Strategies
      • Crypto
      • Direct Indexing
      • Disruptive Technology
      • Energy Infrastructure
      • ETF Building Blocks
      • ETF Investing
      • ETF Education
      • ETF Strategist
      • Financial Literacy
      • Fixed Income
      • Free Cash Flow
      • Innovative ETFs
      • Institutional Income Strategies
      • Leveraged & Inverse
      • Managed Futures
      • Market Insights
      • Modern Alpha
      • Multifactor
      • Responsible Investing
      • Retirement Income
      • Tax Efficient Income
    • Asset Class
      • Equity
        • U.S. Equity
        • Int'l Developed
        • Emerging Market Equities
      • Alternatives
        • Commodities
        • Gold/Silver/Critical Minerals
        • Currency
        • Volatility
      • Fixed Income
        • Investment Grade Corporates
        • US Treasuries & TIPS
        • High Yield Corporates
        • Int'l Fixed Income
    • ETF Ecosystem
    • ETFs in Canada
  • 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
  • Research
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Index Education
    • Index Insights
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Multimedia
    • ETF 360 Video Series
    • ETF of the Week Podcast
    • ETF Prime Podcast
    • Video
  • Company
    • About VettaFi
    • Get VettaFi’ed
  • 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

Sep 28

BlackRock Lists Active Equity Premium Income ETF

Sep 28

Examining the Women Factor

Sep 28

Rising Water Costs Globally Spell Opportunity for This ETF

Sep 28

Harbor Commodity ETF Supported by Strong Tilt Toward Energy

Sep 28

VanEck Ethereum Futures ETF Could Launch Soon

Sep 28

Avantis Launches U.S. Large Cap Equity ETF

Sep 28

Capital Group Launches 5 New Active ETFs

Sep 28

ETF of the Week: MUSQ Global Music Industry ETF

Sep 28

Geopolitics Adds to Indian ETF Case in EPI

Sep 28

Vanguard to Launch 2 Active Fixed Income ETFs Later This Year

QQQ

Invesco QQQ Trust Series I

SPY

SPDR S&P 500 ETF Trust

VOO

Vanguard S&P 500 ETF

JEPI

JPMorgan Equity Premium...

TLT

iShares 20+ Year Treasury...

VGT

Vanguard Information...

SCHD

Schwab US Dividend Equity ETF...

VTI

Vanguard Total Stock Market...

SDS

ProShares UltraShort S&P500

XLK

Technology Select Sector SPDR...


Content continues below advertisement

Loading Articles...
Our Sites
  • VettaFi
  • Advisor Perspectives
  • ETF Trends
Tools
  • ETF Screener
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Database Pro
More Tools
  • Financial Advisor & RIA Center
Explore ETFs
  • ETF News
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Information
  • Contact Us
  • Terms of Use and Privacy Policy
  • © 2023 VettaFi LLC. All rights reserved.

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

ETF Education Channel

How to Allocate Commodities in Portfolios

Tom LydonApr 26, 2022
2022-04-26

A long-running debate in asset allocation circles is how much of a portfolio an investor should...

Core Strategies Channel

Why ETFs Experience Limit Up/Down Protections

Karrie GordonMay 13, 2022
2022-05-13

In a digital age where information moves in milliseconds and millions of participants can transact...

}
X