Where’s Our Eurozone Bond ETF?

June 17, 2014

In an increasingly crowded ETF market, the lack of U.S-listed Europe-focused debt strategies is astonishing.

On June 5, the ECB unleashed a fresh round of unconventional stimulus measures in Europe, putting eurozone bonds—and the serious lack of ETF bond strategies focused on the region—front and center in the minds of global investors again.

Indeed, if you’re looking for a broadly diversified eurozone-specific bond ETF, you’re in for a surprise.

Can you believe that there isn’t one broad Europe- or eurozone-specific sovereign bond ETF listed in the U.S.?

After digging through our ETF Finder for broad eurozone fixed-income ETFs, I myself was surprised to learn of this huge hole in our ETF industry.

Some strategists expect the ECB to eventually pursue bond purchases, further driving down yields that are already ultra-low. Nouriel Roubini told me in a recent interview for an upcoming Alpha Think Tank publication that this could happen as early as year-end.

At our Inside ETFs Europe conference in early June, Michael Jones from RiverFront Investment Group echoed a similar bullish tone regarding eurozone bonds. He based his analysis on the divergence between the beginning stages of the ECB’s unprecedented stimulus coinciding with the U.S. Federal Reserve winding down its own quantitative easing program.

It seems odd to me that issuers are now wracking their brains to find untapped niche markets, and even conjuring up funds based on all kinds of complex methodologies that only a handful of those creating them even understand. Yet here’s this massive market that’s been ignored.

To put things into perspective, if the European Union were looked at as a single economy, the EU would be the world’s largest. To be clear, the EU consists of the eurozone, plus noneuro member nations, such as the U.K., Sweden, Denmark, Poland and Czech Republic.

And if you were to simply aggregate all the eurozone economies into one, it would be the world’s No. 2 economy, behind only the U.S.

If there are really no meaningful U.S.-listed ETFs that focus exclusively on European sovereign debt, it’s a gaping hole in the ETF industry that inspires genuine surprise.

At the very least, don’t you think that a eurozone sovereign debt ETF would have created a lot of interest since Draghi’s “whatever it takes” speech in July 2012, and could still have a big investor base even today?


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