BlackRock’s iShares has launched five new bond products, three ultra-short bond ETFs and two short duration bond ETFs on the London Stock Exchange tracking short duration bond indices in a move to protect investors from future interest rate rises.
The iShares Ultrashort Bond ETFs, which have euro, dollar and sterling share classes, will be based on the Markit iBoxx Liquid Ultrashort indices.
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iShares has also added the iShares Dollar Short Duration Corporate Bond ETF and iShares Dollar Short Duration High Yield Corporate Bond ETF, investing in dollar-denominated corporate bonds maturing within five years. Their total expense ratios are between 0.2% and 0.45% respectively.
The five new ETF’s, which are physically replicating optimised funds, will help investors mitigate the risk of potential rate rises in developed market debt.
The new ETF’s will invest in fixed and floating rate investment grade corporate bonds with the fixed rate bonds maturing between 0-12 months, and the floating rate bonds between 0-3 years.
The total expense ratios (TER) for the ultrashort bond ETFs is 0.2%, and between 0.2% and 0.45% for the short duration products.
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By GlobalDataMatthew Tucker, head of iShares fixed income investment strategy, said: "Interest rates continue to climb and investors are concerned this trend will continue, leading them to demand short maturity ETF solutions."
Tom Fekete, iShares head of product development in EMEA, said: "Long dated bonds are particularly impacted by rising interest rates, and fixed income investors are de-risking by shifting their emphasis towards shorter duration bonds that are less exposed to changes in these rates.
"At the same time, investors who have been on the sidelines of the market are looking for ways to increase their returns, and short duration bonds can offer greater yield than some cash investments," he added.
