Two bond exchange-traded funds (ETFs) from State Street Global Advisors (SSgA) were launched. The SPDR Barclays Capital Short Term Treasury ETF (NYSEArca: SST) and the SPDR Barclays Capital Investment Grade Floating Rate ETF (NYSEArca: FLRN) began trading on the NYSE Arca on December 1, 2011.
SST tracks the performance of the Barclays Capital 1-5 Year U.S. Treasury Index, which includes all publicly issued US Treasury securities that have a remaining maturity of greater than or equal to one year and less than five years, are rated investment grade, and have $250 million or more of outstanding face value. As of November 18, 2011, there were approximately 114 securities included in the Index with an average maturity of 2.8 years. The SPDR Barclays Capital Short Term Treasury ETF's annual expense ratio is 0.12 percent.
'With short-term interest rates near zero, the potential for a rising interest rate environment is a concern for many investors in long-term Treasury bonds,' said James Ross, senior managing director and global head of SPDR Exchange Traded Funds at State Street Global Advisors. 'The launch of the SPDR Barclays Capital Short Term Treasury ETF enhances our short-term government bond SPDR ETF offering, which also includes the SPDR Barclays Capital 1-3 Month T-Bill ETF.'
FLRN is linked to the Barclays Capital U.S. Dollar Floating Rate Note 5 Years Index. The Index includes US dollar-denominated, investment grade floating rate notes that have a remaining maturity of greater than or equal to one month and less than five years, and have $300 million or more of outstanding face value. As of November 18, 2011, there were approximately 320 securities in the Index with an average maturity of 1.71 years. The SPDR Barclays Capital Investment Grade Floating Rate ETF's expense ratio is 0.15 percent.
Floating rate notes, which are often referred to as 'FRNs' or 'floaters,' are debt issues with variable coupon payments that are based on a reference rate, such as 3-month LIBOR with a fixed spread. Coupons are reset periodically and can rise or fall with changes in the reference rate while the spread remains constant.
'With cost efficient access to floatingrate notes, an asset class that is also well positioned for a rising rate environment and features low correlations to many traditional equity and fixed income investments, the SPDR Barclays Capital Investment Grade Floating Rate ETF offers a compelling solution to investors seeking to enhance the diversification of their bond portfolio,' said Ross.
State Street's family of fixed income ETFs, which now includes 26 SPDR ETFs that provide precise access to a wide range of fixed income investments.