BlackRock adds four bond ETFs in Japan

Oct 15th, 2020 | By | Category: Fixed Income

BlackRock has added a medley of fixed income ETFs to its Japanese product line-up.

BlackRock adds four bond ETFs in Japan

BlackRock has listed four new bond ETFs on the Tokyo Stock Exchange.

The new listings on the Tokyo Stock Exchange provide various US Treasury, emerging market sovereign, and euro corporate bond exposures.

BlackRock now offers 22 locally domiciled iShares ETFs in Japan with combined assets under management of $15 billion.

The range comprises two real estate funds, nine fixed income funds, and 11 equity funds. The largest of these is the iShares Core Nikkei 225 ETF (1329 JP) with just over $5bn in assets.

New listings

The iShares 1-3 Year US Treasury Bond ETF (2620 JP) is linked to the FTSE US Treasury Select 1-3 Years Index and comes with an expense ratio of 0.14%.

The index tracks the performance of fixed-rate US Treasury securities with remaining maturities between one and three years. It is currently yielding 0.14% with an effective duration of 1.9 years.

The iShares 20+ Year US Treasury Bond JPY Hedged ETF (2621 JP) tracks the FTSE JPY-Hedged US Treasury Select 20+ Years Index and also costs 0.14%.

The index provides exposure to fixed-rate US Treasury securities at the far end of the yield curve – those with remaining maturities greater than 20 years – while hedging currency exposure between the US dollar and the yen. It is currently yielding 1.3% with an effective duration of 20.2 years.

The iShares USD Emerging Markets Bond JPY Hedged ETF (2622 JP) tracks the JP Morgan Emerging Markets Global Core JPY-Hedged Index and comes with an expense ratio of 0.45%.

The index consists of fixed-rate and floating-rate bonds issued by governments and government agencies in nearly 60 emerging market countries. Issues must be denominated in US dollars and have at least $1bn outstanding to be eligible for inclusion. Currency risk is also hedged. The methodology limits the weight of countries with high amounts of debt outstanding – the largest country exposures are Mexico (5.4%), Indonesia (5.1%), Saudi Arabia (4.7%), Qatar (4.4%), and the UAE (4.3%). The largest credit rating buckets are BBB (35.9%), B (22.0%), BB (15.6%), A (13.9%), and AA (8.5%). The index is currently yielding 4.3% with an effective duration of 8.7 years.

The iShares Euro Investment Grade Corporate Bond JPY Hedged ETF (2623 JP) tracks the Bloomberg Barclays Euro Corporate Bond JPY-Hedged Index and has an expense ratio of 0.28%.

The index contains fixed-rate, investment-grade bonds denominated in euros from corporate issuers operating in industrial, utility, and financial sectors. Companies domiciled in France (20.4%), the US (19.2%), and Germany (13.9%) account for the largest country exposures followed by the UK (8.0%) and Spain (5.7%). Over half of the index is allocated to bonds rated BBB (51.7%) with a significant portion also in bonds rated A (34.5%). The index is yielding 0.55% and has an effective duration of 5.1 years.

The four new funds have each been seeded with JPY 100 million, equivalent to about $1m.

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