New SPDR ETFs offer investors easier access to Australian bond market
State Street Global Advisors (SSgA) launched two SPDR exchange traded funds that invest in Australian government, semi-government and corporate bonds yesterday (July 30).
The SPDR S&P/ASX Australian Bond Fund and the SPDR S&P/ASX Australian Government Bond Fund commenced trading on the Australian Securities Exchange (ASX) on Monday morning.
The SPDRs are the first ETFs to track indices from the S&P/ASX Australian Fixed Income Index Series. This series was created last year by S&P Dow Jones Indices and the ASX. The new products expand the number of ETFs offered by SSgA in Australia to nine, including the country’s largest and most heavily traded ETF, the SPDR S&P/ASX 200 Fund.
Amanda Skelly, SSgA’s head of SPDR ETFs in Australia, says: “These new ETFs aim to give retail investors exposure to markets which have traditionally been difficult and costly to access. Like the entire family of SPDR ETFs, they also provide the building blocks investors can use to diversify their portfolios in a low-cost, easily tradeable and transparent manner.
She continues: “The volatility in global markets in recent years has given many investors cause to diversify their portfolios by adding defensive investments like bonds. The advent of fixed-income ETFs this year marks a milestone for retail investors – especially those seeking to add more stability to their self-managed super fund portfolios – as they offer simple, safe and transparent access to high quality fixed income assets which generate a regular and largely predictable income stream.”
The composition of the S&P/ASX Australian Government Bond Index is 53.1% government bonds and 46.9% semi -government bonds while the S&P/ASX Australian Fixed Interest Index comprises 36.3% government bonds, 32% semi-government bonds, 21.5% supranational/sovereign bonds and 10.2% corporate bonds.
Kheng-Siang Ng, SSgA’s Asia Pacific head of fixed income, says: “By including fixed income in a portfolio you have an asset class whose risk/return characteristics are less correlated to equities markets. We don’t see a significant increase in interest rates for the foreseeable future and the risk is that rates may go lower if the European debt crisis remains unresolved. In this scenario we think some fixed income exposure is a good idea.
“Australian government bonds still command a AAA rating and they remain extremely popular among foreign investors. In light of this we expect them to remain well bid in terms of yields.”