Invesco has launched a Treasury ETF targeting the longer end of the curve for investors looking to shield from market volatility and “uncertain” Federal Reserve policy.
The Invesco US Treasury Bond 10+ Year UCITS ETF (TREL) is the cheapest long-dated ETF on the continent with a total expense ratio (TER) of 0.06% and is listed on London Stock Exchange, Deutsche Boerse, SIX Swiss Exchange and the Borsa Italiana.
TREL will track the Bloomberg US Long Treasury index, measuring the performance of the US dollar-denominated, fixed rate, nominal debt issued by the Treasury with maturities with greater than 10 years.
Invesco will use a sampling method using its portfolio modelling tools to replicate the performance of the wider index.
The asset manager said investors may be looking to turn to longer-dated bonds given the current level of volatility and “uncertainty around the future of the Federal Reserve policy”.
The Fed has hiked rates five times so far this year with more anticipated in November and December after last month’s inflation figures came in hotter than expected.
Paul Syms (pictured), head of EMEA fixed income ETF product management, at Invesco said: “Our research shows investors could maintain the same duration and gain potentially 35 basis points in additional yield by adopting a barbell approach – combining ETFs that target the one to three year and 10+ year maturity buckets – versus a holding in the seven-to-10-year bucket, which is currently looking relatively expensive.”
He added fixed income investors such as pension funds use this approach for liability matching by managing their exposures through maturity buckets.
Gary Buxton, head of EMEA ETFs and indexed strategies at Invesco, said: “We expect fixed income to remain an important driver of growth in the European ETF market, and precision products such as these maturity ranges will enable investors to construct better portfolios and take more control of their investments.”
Invesco has launched several products this year, unveiling two thematic ETFs tracking wind energy and hydrogen in September and two active multi-factor corporate bond ESG ETFs in June.