Amundi launches GBP-hedging for US Treasury bond ETFs

Dec 2nd, 2022 | By | Category: Fixed Income

Amundi has introduced GBP-hedged share classes for three Lyxor-branded US Treasury bond ETFs targeting different maturity segments of the yield curve.

Amundi launches GBP-hedging for US Treasury bond ETFs

Dollar strength against the British pound peaked at the end of September.

Available on London Stock Exchange, two of the new listings focus on US Treasuries with remaining maturities between 3-7 years or 7-10 years, while the third covers bonds with more than ten years until expiration.

They are the Lyxor US Treasury 3-7 Year UCITS ETF – Monthly Hedged to GBP (U37H LN), Lyxor US Treasury 7-10 Year UCITS ETF – Monthly Hedged to GBP (U71H LN), and Lyxor US Treasury 10+ Year UCITS ETF – Monthly Hedged to GBP (UH10 LN).

The 3-7 year, 7-10 year, and 10+ year ETFs house $80 million, $130m, and $650m assets under management, respectively, across all share classes of the funds.

Each new currency-hedged share class comes with an expense ratio of 0.10% which matches the cost of similar GBP-hedged US Treasury bond ETFs offered by BlackRock and Invesco.

Debt markets globally have been battered in 2022 as central banks have raised interest rates at a rapid speed in a bid to cool runaway inflation. US Treasuries have been no exception with the broad maturity ICE US Treasury Core Bond Index posting a year-to-date loss of -12.4% (data as of 29 November).

Unhedged GBP-based investors would have done considerably better, however, as the US dollar has appreciated against the British pound by 10.4% thus far this year.

The dollar’s strength peaked roughly two months ago, however, with the pound appreciating against the dollar by 12.0% since 27 September. GBP-based investors who believe this trend may continue will be well-served utilizing currency-hedged ETFs to gain their US Treasury exposure.

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