18 May – 22 May 2015

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Fixed income ETFs

Fixed income ETFs in Australia have a rosy future according to speakers at the recent S&P Dow Jones Indices Australian ETF Masterclass. Jonathan Howie from iShares, in discussing fixed income ETFs said, “We would be … disappointed not to see similar levels of penetration in fixed income as we have seen in equity exchange traded products … Bonds traditionally have not traded on the exchange and the way they get priced to trade is fundamentally different … the way the information flows through data providers like Bloomberg is different, so people just aren’t used to it. That is rapidly changing, and how data providers like Bloomberg are enabling bond trading desks to treat these ETFs in a similar way they treat bonds is a big part of unpicking that.” Global head of ETF strategy for State Street Global Advisors Kevin Quigg said, “Fixed income exchange traded funds are a better mouse trap … Traditionally, the shortcomings of fixed income securities: number one, they’re OTC. Nobody likes anything that is traded over the counter because they’re obviously not a listed security you can access. Number two: there is no pricing discovery. The pricing discovery in the fixed income market is the guy who picks up the phone when you buy a bond or sell a bond. That’s traditionally the way the market works and is very opaque, hard to understand, very unclear.”

Trading

It was another very quiet week for trading last week with little by way of either inflows or outflows from any of the funds. The one exception was the Russell Australian Semi-Government Bond ETF that saw inflows of $1.06m during the week. The entire sector as a whole only saw cumulative inflows of $1.88m. As with managed funds, performance of many of the ETFs was disappointing last week with most ETFs showing negative returns.

ASX Cash & Bond ETFs *

NAMESYMBOLCLOSE PRICE1m (%)1y (%)MER (%)FUND SIZE ($m)
BetaShares Aust High Int CashAAA 50.150.233.240.18796.13
SPDR S&P/ASX Aust BondBOND 26.04-1.229.30.2415.76
SPDR S&P/ASX Aust Govt BondGOVT 25.86-1.389.820.225.2
iShares Composite Bond ETFIAF 106.58-1.128.720.24180.38
iShares Treasury ETFIGB 105.62-1.59.380.2616.59
iShares Govt Inflation ETFILB 114.25-2.0313.490.2632.44
Russell Aust Select Corp Bond ETFRCB 20.49-0.3550.2880.12
Russell Aust Govt Bond ETFRGB 21.21-1.7411.590.2497.43
Russell Aust Semi-Govt Bond ETFRSM 20.67-0.827.420.26146.64
Vanguard Aust Fxd Int Index ETFVAF 49.92-1.18.930.2177.52
Vanguard Aust Govt Bond Index ETFVGB 48.8-1.39.550.244.53
*1m/1y performance as at end of April 2015. Closing price as at week end. Return in AUD before Fees