State Street launches international junk bond ETF

State Street Global Advisors, the second-largest US provider of exchange-traded funds, is expanding its offering of high-yield bond ETFs with the introduction of the SPDR Barclays International High Yield Bond ETF (NYSEArca:IJNK).

IJNK will track the Barclays Global ex-US Issuers High Yield Corporate Bond Index, a measure of the high yield fixed corporate income markets outside the US. The securities included in the index must have a market value of at least $350 million (₤210 million) and more than a year left to their maturity date.

They must also be rated as ‘high yield’, which means having an average rating of Ba1/BB+/BB+ out of the three major credit rating agencies. IJNK won’t include any floating rate notes, linked bonds, convertible bonds, warrants and other structured offerings. There were a total of 716 securities from 46 countries included in the index as of February 28.

The ETF will offer investors a moderately low expense ratio – 0.40 percent or $40 for every $10,000.

Last year new issues of junk bonds doubled in Europe to $76 billion (₤45.5 billion), increasing the presence of foreign issuers on the high-yield market. International high-yield bonds accounted for 44 percent of the international junk bond market in 2012, up from 11 percent in 1997, according to data from BofA Merrill Lynch.

SPDR Barclays High Yield Bond ETF (NYSEArca: JNK)

JNK, the US alternative of IJNK, returned about 5.89 percent to investors last year and 2.87 percent so far in 2014. The fund is the second-largest US junk bond ETF with $10.22 billion (₤6.1 billion) assets under management. The market value-weighted average maturity of the bonds included in JNK is 6.65 years while the weighted average yield if held to maturity is 5.92 percent. The fund’s expense ratio is 0.40 percent.

SPDR Barclays Short Term High Yield Bond ETF

SJNK is a lower duration alternative of JNK – its market value-weighted average maturity is 3.54 years. SJNK outperformed JNK last year with a return of 6.84 percent but is lagging behind its peer in 2014 with a year to date return of 1.32 percent. It has $3.53 billion of assets under management and an expense ratio of 0.40 percent.

As of 13.45 UTC buy SPDR Barclays High Yield Bond ETF at $41.12.

As of 13.45 UTC sell SPDR Barclays High Yield Bond ETF at $41.10

As of 13.45 UTC buy SPDR Barclays Short Term High Yield Bond ETF at $30.92.

As of 13.45 UTC sell SPDR Barclays Short Term High Yield Bond ETF at $30.91