The iShares global inflation-linked bond provides investors with exposure to the Barclays world government inflation-linked bond index. The index consists of 90 bonds across 10 different countries and seven different currencies. The new bond is designed to provide a degree of protection against global inflation in a single trade.
The iShares euro covered bond provides investors with liquid exposure to a range of European covered bonds based on the Markit iBoxx euro covered index. There are 448 bonds in the index and 93 per cent of these are AAA-rated. At June 30, 2008, the average annual yield was 5.25 per cent with a duration of 4.25 years.
The new covered bond enables holders to invest in a diversifying asset class without diluting the overall credit quality of their portfolio. They are also designed to have greater security as holders have a preferential claim on a legally segregated pool of collateral assets.
These two launches take the total number of iShares ETFs listed on the London Stock Exchange to 64.
iShares senior fixed income portfolio manager Alex Claringbull says: “These new funds are ideally suited to today’s economic climate as investors return to safety in the face of volatile market conditions – and they offer this safety in the transparent, liquid and diversified structure of an ETF. Rising inflation is a major concern for investors, and we’re anticipating increased demand from investors for inflation-linked ETFs as they look to protect their investments from this pressure.”
He adds: “Covered bonds also offer an attractive yield pick-up over sovereign, supranational and agency bonds”.