The first ever 10Y Italian Government Bond (BTP), 10Y US Treasuries and Bund 10Y 3x short ETPs are launched on the back of demand for short exposure to fixed income as rates are expected to rise.
The three ETPs are the Boost BTP 10Y 3x Short Daily ETP, the Boost Bund 10Y 3x Short daily ETP and the Boost US Treasuries 10Y 3x Short Daily ETP, bringing its listings to a total of 75 across Borsa Italiana, the London Stock Exchange, and Xetra.
According to a note from Boost ETP, German and Italian government debt are the most popular short and leveraged European debt ETPs, with $1.1 billion and $216 million, respectively, in assets under management as at 30 June 2014.
This year’s unwinding of quantitative easing (QE) in the U.S. may have set a precedent for looming interest rate increases as the U.S. economy continues to grow. Upbeat producer and consumer sentiment indicators for the U.S., combined with the Fed’s confident tone in justifying the trimming of QE by another $10 billion per month, has driven short and leveraged investors to cut their long positions in Treasuries. The strong U.S. jobs numbers for June furthermore support the view that interest rate increases may come sooner rather than later.
Hector McNeil, co-CEO of Boost ETP, a WisdomTree Company, said in a statement: "Given the persistence of low interest rates which cannot fall much further and which the market expects to begin increasing in the near term, BOOST's 3x short ETPs should now give investors a valuable range of new tools which could enhance their investment returns or hedge against rising rates.”
The three new fixed income ETPs are designed to return minus 3x the daily movement of the relevant benchmark index. For example, if the BNP Paribas Long Term BTP Future Index falls by 1 percent on a day, then Boost BTP 10Y 3x Short Daily ETP will rise by 3 percent on that day (less fees and adjustments). Conversely, if the BNP Paribas Long Term BTP Future Index rises by 1 percent on a day, then it will fall by 3 percent on that day.
Most recently Boost ETP moved into the German market with the launch of four of its products on Deutshe Bourse’s Xetra.