Stanlib launches SA government bond ETF

Jun 14th, 2019 | By | Category: Fixed Income

South African asset manager Stanlib has launched a new ETF on Johannesburg Stock Exchange, providing exposure to domestic government bonds from across the yield curve.

Stanlib South Africa government bond ETF

The fund provides exposure to local currency South African government bonds from across the yield curve.

The Stanlib SA Bond ETF (ETFBND SJ) is linked to the S&P South Africa Sovereign Bond 1+Year Index which covers local currency sovereign debt issued by the South African government.

The index includes fixed rate, zero coupon, step-up, and fixed-to-floating bonds, but will exclude STRIPS, inflation-linked, floating-rate, puttable, and sukuk issues.

Bonds eligible for inclusion in the index must have a remaining maturity of more than one year.

The index is weighted by market value and rebalanced on a monthly basis. It currently consists of 13 constituents with a weighted coupon of 8.4% and is yielding 9.1%. The index’s effective duration is 7.2 years.

The ETF comes with an expense ratio of 0.29%.

There are a further four ETFs listed in Johannesburg that provide exposure to South African government securities. Three of them target inflation-linked bonds, the cheapest being the Satrix ILBI ETF (STXILB SJ) with an expense ratio of 0.25%. It has AUM of R80m.

The other fund – the NewFunds GOVI ETF (NFGOVI SJ) – also provides exposure to conventional government bonds from across the yield curve. With an expense ratio of 0.23%, it is slightly cheaper than the Stanlib fund. It houses AUM of R720m.

S&P currently rates South Africa’s local currency debt at BB+, just on the wrong side of the border between investment-grade and high yield. South Africa was downgraded to this status in November 2017 with S&P citing the country’s stagnating economy and the erosion of its external competitiveness as contributing factors.

S&P recently confirmed the rating but noted that its outlook is stable. The rating agency said it would continue to monitor economic reforms aimed at reviving the economy which are being enacted by the new government.

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