Market Vectors ETF Trust announced today that it has launched the Market Vectors Treasury-Hedged High Yield Bond ETF (NYSE Arca: THHY), an exchange-traded fund (ETF) is designed to combine the income potential of high-yield corporate bonds with the interest rate hedging capability offered by shorting Treasury notes.
“I believe it is not a question of if, but rather when, we will begin to see rising interest rates,” said Fran Rodilosso, Fixed Income Portfolio Manager with Market Vectors. “Predicting when rates will ascend again is obviously the hard part. With THHY, investors have the ability to better position their bond portfolios now for a rising interest rate environment, but they can do so while still earning income on the fund and even have upside potential during a low interest rate environment.”
THHY seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Market Vectors® U.S. Treasury-Hedged High Yield Bond Index (MVTHHY), which was designed to provide exposure to below-investment grade corporate bonds, denominated in U.S. dollars, and, through the use of 5-year U.S. Treasury notes, to hedge against the price sensitivity to interest rate fluctuations of the bonds included in the Index.
The long positions in THHY’s underlying index are comprised of U.S. below-investment grade corporate bonds, denominated in U.S. dollars. Qualifying securities must have a below-investment grade rating (based on an average ratings of Moody’s, S&P and/or Fitch) and at least one year remaining to final maturity, a fixed coupon schedule, and a minimum amount outstanding of $500 million. The short positions in the Index are composed of current 5-year United States Treasury notes in the equivalent dollar amount of the long high-yield positions at every rebalance date. The Fund and its underlying index do not currently use any swaps or derivatives.