Asset Allocation and Portfolio Construction Conference – Thursday 3 November 2022 – London Stock Exchange Join us for our 2022 flagship event, featuring leading economists and strategists from 19 different organisations. Please register now if you wish to attend.
Invesco expanded its Treasuries range with the launch of Europe’s cheapest ETF targeting US government bonds at the end of the yield curve.
The Invesco US Treasury Bond 10+ Year UCITS ETF was listed on London Stock Exchange in US dollars (TREL-LN) and the British pound (TRLX LN), on SIX Swiss Stock Exchange in US dollars (TREL SW), and on Xetra (TRDL GY) and Italian scholarship (TREL-GI) in euros.
The fund comes with an expense ratio of just 0.06%.
The ETF is linked to the Bloomberg US Treasury Index Long which consists of nominal, fixed-rate, US dollar-denominated debt issued by the US Treasury with maturities greater than ten years.
Treasury bills, inflation-linked bonds, floating rate bonds and STRIPs are not eligible for inclusion.
The constituents are weighted by market value, and the index is reconstituted and rebalanced on a monthly basis.
At the end of September, the index posted a return of 4.00% with an effective duration of 16.35 years.
The index has posted a massive negative total return of 28.8% since the start of the year, by far the biggest loss in its history. Debt markets around the world have been battered in 2022 as central banks have raised interest rates at a rapid pace in an effort to rein in runaway inflation.
Bonds, especially those with longer maturities, could suffer more as the Federal Reserve appears determined to hold its course despite the risk of recession. In its latest projections, the Fed announced its intention to raise rates an additional 1.25 percentage points before the end of 2022, bringing the federal funds rate to 4.25%-4.50%.
Despite this outlook, US Treasuries are a key part of investors’ core portfolios, and Invesco’s range of low-cost US Treasury bond ETFs, which collectively hold $5.6 billion in assets under management across six products, provides a comprehensive toolkit to effectively manage duration and maturity exposure.
The range includes four other funds offering targeted exposure to different segments of the yield curve: 0-1 year, 1-3 year, 3-7 year or 7-10 year, as well as a fifth ETF which offers broad exposure on a maturity spectrum of one to 30 years. These ETFs also come with expense ratios of 0.06%.
Paul Syms, Head of EMEA Bond ETF Product Management at Invesco, said: “Fix investors with duration or yield objectives can manage their exposures by maturity bucket. Pension funds may use this approach for matching liabilities while others may adjust their portfolios to account for opportunities across the curve. For example, our research shows that investors could maintain the same duration and potentially gain 35 basis points of additional yield by adopting a barbell approach – combining ETFs that target the 1-3 year and 10-year maturity buckets and plus – relative to a position in the 7-10 year tranches. A 10-year-old bucket that currently seems relatively expensive. »
Gary Buxton, Head of EMEA ETFs and Index Strategies at Invesco, added: “We continue to grow our range of ETFs with investor-focused solutions, including low-cost offerings for key markets as well as higher exposures. innovative. We expect fixed income to remain an important driver of growth in the European ETF market, and precision products such as these maturity ranges will allow investors to build better portfolios and gain more control over their investments. .