By the ETF research team at Invesco.

AT1 contingent convertible bonds (“AT1s”) are securities issued by financial institutions that generally carry higher yields than traditional fixed income securities.

VanEck has completed the integration of Think ETFs into its product portfolio. Effective immediately, the 14 funds acquired in January 2018 through the purchase of Dutch issuer Think ETFs have been renamed under the VanEck Vectors brand. Martijn Rozemuller, European Head of VanEck, commented, “We are delighted to reinforce the VanEck brand in the UK and Europe…Our long-term objective is to be one of the top ten providers of ETFs in Europe.”

VanEck Australia has launched a new ETF – the VanEck Vectors Australian Subordinated Debt ETF (SUBD AU) – on the Australian Securities Exchange. The fund is linked to an index from IHS Markit that provides exposure to investment grade subordinated bonds denominated in Australian dollars.

Amundi has launched a new ETF in Europe enabling investors to capitalize on rising inflation expectations in the US. The Amundi Index Breakeven Inflation USD 10Y UCITS ETF targets the spread between conventional fixed-rate Treasury bond yields and those of inflation-linked bonds, thus offering a play on inflation expectations without exposing the investor to changing interest rates. It has listed on Euronext Paris in US dollars (BINFU FP) and on Euronext Amsterdam in euros (BINFU NA).

Invesco’s contingent convertible bond ETF, the Invesco AT1 Capital Bond UCITS ETF, has surpassed $500 million in assets under management. The milestone was reached on Tuesday, sixteen months after the fund’s inception on the London Stock Exchange in June last year. Jim Goldie, Head of EMEA ETF Capital Markets, Invesco, commented, “The growth of our AT1 ETF is a great example of how investors are using the wrapper to obtain exposure to segments of the fixed income market that they may not be able to access directly.”

Amundi has announced upcoming changes to the replication method of six of its euro government bond ETFs. The ETFs in question presently use a synthetic or swap-based approach to deliver the performance of their underlying indices, but, as of 15 November 2019, will switch to direct physical replication.

VanEck has cross-listed nine Think ETFs onto SIX Swiss Exchange. The expansion into Switzerland follows VanEck’s acquisition of Netherlands-based ThinkCapital at the beginning of 2018. The funds, which maintain primary listings on Euronext Amsterdam, offer a mix of equity, fixed income, and real estate exposure.

By Karen Schenone, Fixed Income Product Strategist, BlackRock.

Economic uncertainty has increased investor focus on the possibility of BBB-rated bonds being downgraded to junk. Investors should weigh this risk with their search for yield.

Global information provider IHS Markit has unveiled the IHS Markit Global Carbon Index, the first index to track the weighted average price of carbon credits globally. Sophia Dancygier, Managing Director and Head of Indices at IHS Markit, commented, “The IHS Markit Global Carbon Index creates a valuable new benchmark for corporations, investors, and financial services firms, all of which have to navigate the emerging but increasingly important markets for carbon credits.”

Professional investors are expected to increase their allocations to fixed income over the next three years and within those allocations boost their exposure to ETFs, according to research commissioned by Tabula Investment Management. The research also uncovered an appetite for new product development within fixed income ETFs with more than half of investors keen to see the sort of smart beta innovation exhibited in equity markets replicated in the fixed income space.