WisdomTree has launched the world’s first coronavirus recovery ETF, a basket of European Union-issued bonds focused on limiting the damage caused by the pandemic.
The WisdomTree European Union Bond UCITS ETF (EUBO) is listed on the Borsa Italiana and Deutsche Boerse with a total expense ratio (TER) of 0.16%.
Tracking the iBoxx EUR European Union Select Index, EUBO offers investors exposure to euro-denominated investment grade bonds issued by the EU.
The market-cap-weighted index is made up of bonds issued by the EU to finance its SURE programme and NextGenerationEU initiative – which have ceilings of €100bn and €750bn, respectively.
These schemes have the aim of trying to limit the damage done the coronavirus pandemic by mitigating against unemployment as well as immediate social and economic risks.
Lidia Treiber, director, research at WisdomTree, commented: “EU bonds could add another highly rated and liquid instrument with the capacity to become a larger share of the European Central Bank’s asset purchasing programmes.
“EU bonds benefit from a strong credit rating and can help investors reduce the credit risk across portfolios while benefiting from a yield pick-up relative to German sovereign bonds.
“While supply of EU bonds will rise, demand has been exceptionally high with primary issuance to date oversubscribed, owing to the EU being a high-quality issuer and an environmental, social and governance (ESG) component attached to bonds issued under the SURE programme.
“We expect this trend of high demand to continue once the NextGenerationEU initiative rolls out.”
The firm added that all bonds issued under the SURE programme fall under the social bond framework, while a number of EU bonds issued under NextGenerationEU could be within the remit of the EU’s social or green bond frameworks.
The EU’s initiatives and long-term budget together form the largest stimulus package ever financed through the EU, with a combined cost of €1.8tn. With the European Commission indicating bond issuance of €850bn, the EU will become the second-largest AAA rated issuer in Europe.
Alexis Marinof (pictured), head of Europe at WisdomTree, added: “EUBO reflects our approach to product development and providing investors with unique exposures, whether that is by being first to market or developing differentiated strategies.”