New Currency ETN from Barclays

| About: iPath GEMS (AYT)

Barclays Capital announced today, Sept. 4, a new ETN that bundles eight Asian currencies tied to their GEMS Asian 8 Index.   It trades under the symbol AYT. Similar to their GEMS Index, which I covered in my August 13 article, "Carrying the Dollar Upstream", the new ETN narrows the focus from a global perspective to the Asian emerging markets.

The currencies included are:

  • Indonesian rupiah: current interest rate, 9.25%
  • Indian rupee: current interest rate, 9.0%, expected to rise again soon.
  • Philippine peso: short-term commercial lending rate, 9.0%
  • S. Korean won: August interest rate, 5.25%
  • Thai baht: current interest rate, 3.75%
  • Malaysian ringgit: Overnight rate, 3.5%
  • Taiwan dollar: current interest rate, 3.625%
  • Chinese Yuan:  interest rates not reported.

This new ETN follows the traditional Barclays 30-year maturity and is a senior, unsecured, unsubordinated debt security issued by Barclays Bank PLC linked to the performance of a market index.  Here is a link to their SEC filing.

More interesting to me is the orientation of the new fund to producing interest income. Philippe El-Asmar Head of Solution Sales, Americas at Barclays Capital said in the press release: "As investors look for diversified ways to access emerging market growth, we have seen increasing interest in packaged currency investments, especially those that offer high levels of current income."

To see how many of these currencies fared in August, see my recent article, "Hard Times for Soft Currencies". Inflation is a current problem for all the nations in the index, but the Philippines and Indonesia are having the hardest time with it. Thailand and Malaysia are experiencing serious political turmoil, and this will take a toll on their currencies in the immediate future. The Chinese yuan, in my view, offers the best chance of long term appreciation, but there are little interest earnings there. Barclays probably uses futures contracts to pick up something approximating a short-term yield in China.

Disclosure: none

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