iShares launch two Interest Hedged IG Corporate bond ETFs

iShares has launched a USD and GBP variant of their IG Corporate Credit Interest hedged ETFs in complement to their existing iShares Euro Corporate Bond Interest Rate Hedged UCITS ETF. The product has a long position in the IG Corporate Credit Index exposure coupled with a Short position in corresponding Sovereign bond futures, hence hedging interest rate increase, isolating the Corporate Credit premium.

 

The iShares $ Corporate Bond Interest Rate Hedged UCITS ETF is an exchange traded fund (ETF) that aims to track the performance of the Markit iBoxx USD Liquid Investment Grade Interest Rate Hedged Index (Index) as closely as possible. The ETF invests in physical index securities and futures contracts in line with the index. 

The Index aims to measure the total return of Dollar denominated corporate bonds in the Markit iBoxx USD Liquid Investment Grade Index (Underlying Index) while hedging against underlying interest rate risk of Dollar corporate bonds. The Underlying Index measures the performance of Dollar denominated, investment grade corporate fixed income (FI) securities which pay income according to a fixed rate of interest. The Index hedges against underlying interest rate risk by selling US Treasury bond futures. The return on the futures contract is subtracted from the total return of the Underlying Index on a monthly basis. The hedge aims to reduce exposure to changes in the US Treasury bond interest rate curve, which shows the interest rates of different maturities. No adjustment is made to the hedge during the month to account for price movements of FI securities of the Index.

 

The iShares £ Corporate Bond Interest Rate Hedged UCITS ETF is an exchange traded fund (ETF) that aims to track the performance of the Markit iBoxx GBP Liquid Corporates Large Cap Interest Rate Hedged Index (Index) as closely as possible. The ETF invests in physical index securities and futures contracts in line with the index. The Index aims to measure the total return of Sterling denominated corporate bonds in the Markit iBoxx GBP Liquid Corporates Large Cap Index (Underlying Index) while hedging against underlying interest rate risk of Sterling corporate bonds. 

The Underlying Index measures the performance of Sterling denominated, investment grade corporate fixed income (FI) securities which pay income according to a fixed rate of interest. The Index hedges against underlying interest rate risk by selling 10 year UK Gilt futures. The return on the futures contract is subtracted from the total return of the Underlying Index on a monthly basis. The hedge aims to reduce exposure to parallel shifts in the UK government bond interest rate curve, which shows the interest rates of different maturities. No adjustment is made to the hedge during the month to account for price movements of FI securities of the Index.

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