First US$ covered bond ETF out, tracks BNPP index
Exchange traded funds provider ProShares launched an ETF invested in US dollar denominated covered bonds yesterday (Wednesday) that it says “fills a gap” by making available an investment opportunity not broadly accessible in the US until now.
Referencing research provider Morningstar, ProShares said that the ETF is the only corporate bond fund in the US with “substantially all” of its assets rated triple-A. The ETF, ProShares USD Covered Bond (COBO) was listed on NYSE Euronext’s NYSE Arca exchange yesterday.
“Many investors are interested in high credit quality bonds, but the supply of AAA-rated corporate debt in the US is very limited,” said Michael Sapir, chairman and CEO of ProShare Advisors LLC, ProShares’ investment advisor. “COBO, a first-of-its-kind ETF, fills the gap by accessing the highest rated segment of the $3tr, 240 year old covered bond market.”
According to ProShares, the ETF will seek to match the performance of the BNP Paribas USD Covered Bond Index, before fees and expenses.
Unlike some major US indices, the BNP Paribas index, launched in July 2011, includes covered bonds issued under Rule 144A as well as any registered with the SEC – something that could emerge for the first time after Royal Bank of Canada registered its covered bond programme last Friday.
As of 31 March, the index included 36 bonds, according to ProShares. The ETF’s holdings as of Tuesday included covered bonds issued out of Australia, France, Norway, Canada, Sweden, Switzerland, and the UK.
The biggest single holding by market value is $528,435.7 of a $3bn 1.625% September 2016 Toronto-Dominion Bank covered bond, corresponding to it being the biggest constituent of the BNP Paribas index, with a 4.35% weighting. Six of the index’s top 10 constituents are Canadian, reflecting their dominance in US dollar issuance over the past two years.
Full details on the ETF’s holdings and more information can be found here:
