Boost launches 3x short UK government bond ETP on LSE

Aug 7th, 2014 | By | Category: Alternatives / Multi-Asset

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Boost, a leading European provider of short and leveraged exchange-traded products and a division of WisdomTree, has listed Europe’s first ever triple inverse fixed income ETP.

Boost launches 3x short UK government bond ETP on LSE

The launch of the Boost Gilts 10Y 3x Short Daily ETP (3GIS) comes at a time when the odds of the Bank of England raising interest rates are increasing. (© Adrian Pingstone)

Listed on the London Stock Exchange, the Boost Gilts 10Y 3x Short Daily ETP (3GIS) will provide a return comprised of three times the inverse daily performance of the BNP Paribas Long Gilt Future Index, plus the interest revenue earned on the collateralised amount.

The BNP Paribas index tracks front-month long-Gilt futures, which are traded on LIFFE and deliver UK government bonds with 8.75-13 years to maturity.

The launch – Boost’s 76th product listing – comes at a time when economic activity is picking up in the UK and the prospect of the Bank of England raising interest rates is increasing.

Rising interest rates are a boon to inverse bond ETPs as bond prices move inversely to interest rates (a short bond position would therefore benefit from rising rates). For example, if the BNP Paribas Long Gilt Future Index falls by 1% on a day, then “3GIS” will rise by 3% on that day (less fees and adjustments). Conversely, if the BNP Paribas Long Gilt Future Index rises by 1% on a day, then “3GIS” will fall by 3% on that day.

The ETP, which trades and settles the same as an equity share, offers opportunities for both short-term tactical traders looking to capitalise on raising rates and longer-term investors looking to protect themselves against rising interest rates and hedge existing long fixed income positions.

Hector McNeil, Co-CEO of Boost, said: “We believe that 3x short fixed income ETPs are exciting additions to the UK ETP market and introduce investment products which investors currently demand, but have not been available until now. Given the persistence of low interest rates which cannot fall much further and which the market expects to increase 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.”

Viktor Nossek, Head of Research at Boost, added: “Growing bearishness of short and leveraged investors on fixed income securities was evident in the $1.1 billion in outflows from long positions, globally. Following these large redemptions, 92% of short and leveraged fixed income ETPs’ AUM is now held in short positions, suggesting short and leveraged investors remain overwhelmingly bearishly positioned.”

The ETP has an annual management fee of 0.30%.

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