Defiance debuts first Israel bond ETF

Dec 13th, 2023 | By | Category: Fixed Income

Defiance has launched the first fixed income ETF in the US to provide targeted exposure to the Israeli bond market.

Defiance debuts first Israel bond ETF

The ETF is the first in the US to provide targeted exposure to Israel’s bond market.

The Defiance Israel Bond ETF (CHAI US) has been listed on NYSE with an expense ratio of 0.48%.

The fund tracks the MCM-BlueStar Israel Bonds Index, a collaborative creation with Migdal Capital Markets. It focuses on fixed-rate bonds in both US dollars and Israeli shekels, issued by the Israeli government or corporations. Excluded from the index are inflation-linked and floating securities.

The definition of an Israeli company is determined by a range of factors including country of incorporation and headquarters, geographic revenue and asset distribution, country of founding, and domicile of members of the executive team and board of directors.

For a bond to be included in the index, corporate issuers must have a minimum outstanding amount of $100 million or 250 million shekels. Bonds must also be traded in denominations of at least $10,000 and have a remaining maturity period of no less than 18 months. Criteria for selection include that only investment-grade bonds denominated in shekels are eligible, while US dollar-denominated bonds must hold a credit rating of BB- or higher.

Constituents in the index are weighted by their market value with a maximum weight of 25% for sovereign debt, 7.5% per any single corporate issuer, and 5% for any single bond. The index is reviewed and rebalanced monthly.

As of 7 December, the index contained 35 bonds with an average yield to maturity of 5.73% and an effective duration of 5.81 years.

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