Daily ETF Watch: New Fund Of Bond Funds

March 21, 2014

The newly proposed fund will invest in other iShares fixed-income ETFs.

iShares has put into registration a fund of funds dubbed the iShares Yield Optimized Bond ETF (BYLD) that will track an index composed of underlying iShares fixed-income ETFs spanning a range of investment-grade and noninvestment-grade securities.

The filing comes at a time when investors are looking for yields in all corners of the fixed-income market and even outside of it. Rates are low as it is, and the Federal Reserve’s most recent policy meeting has left investors with a sense that rates are likely to be trending higher in the coming months. That means capital losses are quite probable as bond prices fall.

The Federal Reserve’s continuous focus on tapering its bond-buying program and Fed Chair Janet Yellen’s suggestion that the Fed could raise short-term rates earlier rather than later in 2015 has investors on edge.

BYLD’s index, the Morningstar U.S. Bond Market Yield-Optimized Index, will have exposure to government-related fixed-income securities, securitized fixed-income securities, investment-grade credit securities and noninvestment-grade credit securities, according to the filing.

Some iShares ETF represented in the index include the iShares 1-3 Year Treasury Bond ETF (SHY | A-97), iShares 10+ Year Credit Bond ETF (CLY | C-78) and the iShares iBoxx $ High Yield Corporate Bond ETF (HYG | B-75).

The fund comes with a price tag of 0.28 percent, or $28 for every $10,000 invested.

Index News

Credit Suisse has informed ProShares Trust that as of March 31, 2014, Dow Jones and Credit Suisse will be ending their joint relationship on the production of the Dow Jones Credit Suisse Breakeven Index series.

Going forward, calculation and publication of the indexes will be controlled solely by Credit Suisse.

Therefore, effective April 1, the Dow Jones Credit Suisse 30-Year Inflation Breakeven Index, which was tracked by the ProShares 30 Year TIPS/TSY Spread (RINF) and the ProShares Short 30 Year TIPS/TSY Spread (FINF) will be called the Credit Suisse 30-Year Inflation Breakeven Index.

Also, Dow Jones Credit Suisse 10-Year Inflation Breakeven Index, which was tracked by the ProShares UltraPro 10 Year TIPS/TSY Spread (UINF) and the ProShares UltraPro Short 10 Year TIPS/TSY Spread (SINF), will be called the Credit Suisse 10-Year Inflation Breakeven Index.

While the index’s names will change, their methodologies will remain the same in all respects, according to the filing.

 

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