Yesterday (5/20/10), State Street launched the first international corporate bond ETF for U.S. investors: SPDR Barclays Capital International Corporate Bond ETF (IBND). This is the fourth fund State Street targeting foreign fixed income markets.
The underlying Barclays Capital Global Aggregate ex-USD >$1B: Corporate Bond Index is designed to be a broad-based measure of the global investment-grade, fixed rate, fixed income corporate markets outside the United States.
It’s important to understand that IBND excludes US dollar-denominated bonds, but not bonds issued by US companies payable in other currencies. In fact, the US has the largest country weighting at 17.5%, followed by Germany 16.1%, United Kingdom 12.5%, France 11.3%, and Italy 8.7%. I could not find any information detailing the fund’s currency exposure.
The overview page shows the fund’s current sector breakdown as Financials 46.9%, Industrials 39.5%, and Utilities 11.6%. The underlying index has 532 holdings, which the fund tries to match with only 88 positions. Average maturity is 5.3 years and the modified adjusted duration is 4.4 years.
According to the fact sheet (pdf), the underlying index has a yield (average yield to worst) of 3.05%. If IBND tracks this characteristic accurately, then it should be expected to yield about 2.5% after the 0.55% expense ratio.
Other SPDR International Fixed Income ETFs are SPDR Barclays Capital International Treasury Bond ETF (BWX), SPDR Barclays Capital Short Term International Treasury Bond ETF (BWZ), and SPDR DB International Government Inflation-Protected Bond ETF (WIP).
Disclosure covering writer, editor, and publisher: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.