SSGA ETFs offer yield-curve positioning as Fed tightens

ETF tradingA range of exchange-traded funds (ETFs) that will allow investors to allocate to any part of the yield curve has been launched in Germany.

State Street Global Advisors (SSGA) has launched 11 ‘core exposure’ fixed income ETFs on the Deutsche Börse Xetra, saying that investors’ flexibility to allocate to specific segments of the yield curve is “crucial”, especially as the Federal Reserve tightens monetary policy.

SSGA, which runs the SPDR ETF brand, says choosing whether to invest across the entire yield curve, or only in certain segments of it, can have a notable impact on portfolio returns.

From 1995-2015 the Barclays US Treasury index returned 217%, but with significant variability across the curve. The 1-3 year index returned 125%; the ten-year plus index returned 410%.

If an investor has a high conviction that interest rates are going to increase they may want to position themselves on the short end of the curve.

Funds Europe covers yield-curve allocation in more depth here.

Alexis Marinof, regional head of SPDR ETFs, said: “We are in a ‘lower for longer’ economic environment with low growth, subdued inflation, and limited global policy tightening all on the cards.

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