Top 10 Global Government Bond ETFs

In a world of depressed or low interest rates combined with a debt crisis it might be hard to imagine investors would be interested in bonds from this sector. That said an overseas investor might from their view see the U.S. Treasury bond market in the same manner--low interest rates, credit downgrades, enormous debt and funding requirements or supply.

Strangely or not investors, especially institutional investors, have their investment guidelines and mandates which include bonds from a variety of sources and sectors. So while the situation in the eurozone may seem off-putting investors still forge ahead with their investments at least for now. Another reason why investors seem confident in their investing is that most central banks are in full bailout mode and are propping markets as best they can with various QE (Quantitative Easing) strategies or plain old fashioned money printing. This is why many investors pair their bond holdings with gold but that's another subject for another day.

In this review we'll post the most popular to the most interesting issues in the category we can find. Rankings are more difficult and subjective especially given the newness and unique issues available as we descend from high AUM (Assets under Management) to newer issues still finding their way to gaining attention.

We rank the top 10 ETF by our proprietary stars system as outlined below. However, given that we're sorting these by both short and intermediate issues we have split the rankings as we move from one classification to another.


Strong established linked index
Excellent consistent performance and index tracking
Low fee structure
Strong portfolio suitability
Excellent liquidity


Established linked index even if "enhanced"
Good performance or more volatile if "enhanced" index
Average to higher fee structure
Good portfolio suitability or more active management if "enhanced" index
Decent liquidity


Enhanced or seasoned index
Less consistent performance and more volatile
Fees higher than average
Portfolio suitability would need more active trading
Average to below average liquidity


Index is new
Issue is new and needs seasoning
Fees are high
Portfolio suitability also needs seasoning
Liquidity below average

We feature a technical view of conditions from monthly chart views. Simplistically, we recommend longer-term investors stay on the right side of the 12 month simple moving average. When prices are above the moving average, stay long, and when below remain in cash or short. Some more interested in a fundamental approach may not care so much about technical issues preferring instead to buy when prices are perceived as low and sell for other reasons when high; but, this is not our approach.

Premium members to the ETF Digest receive added signals when markets become extended such as DeMark triggers to exit overbought/oversold conditions.

#10: Pimco Australian Bond ETF (AUD)

AUD follows the BofA Merrill Lynch Diversified Australia Bond Index which tracks the performance of large, Australian dollar-denominated investment grade debt instruments publicly issued in the Australian domestic market, including sovereign, quasi-government, corporate, securitized and collateralized securities.

The fund was launched in November 2011. The expense ratio is .45%.  AUM equal $22 million and average daily trading volume is less than 4K shares. As of late January 2012 the annual dividend yield is projected at 3.38% and YTD return 1.82%.

Data as of First Quarter 2012

AUD Top Ten Holdings & Weightings
  1. New S Wales Treasury Crp: 9.72%
  2. Queensland Treasury Corp: 5.38%
  3. Australian Government: 5.02%
  4. New S Wales Treasury Crp Loc Gov Gtd 16: 4.84%
  5. Intl Finance Corp: 4.70%
  6. Australian Government Bd Sr Unsec 124: 3.68%
  7. Hsbc Bank Plc: 3.29%
  8. Telstra Corp Ltd: 3.23%
  9. Australian Government: 3.11%
  10. Queensland Treasury Corp: 2.79%

#9: WisdomTree Australia / New Zealand Bond ETF (AUNZ)

AUNZ is not linked to a specific benchmark and would likely be considered a more active ETF. From the sponsor website is this description: WisdomTree Australia & New Zealand Debt Fund seeks a high level of total returns consisting of both income and capital appreciation. The Fund attempts to achieve its investment objective through investment in debt securities denominated in Australian or New Zealand Dollars. 

The fund was launched in June 2008 first as BNZ (New Zealand Dollar ETF) but changed in October 2011 as this reconstituted ETF. The expense ratio is .45%. AUM equal $26 million and average daily trading volume is 18K shares. As of late January 2012 the annual dividend yield is 3.55% and YTD return 1.01%. The most recent one year return which presumably includes BNZ data was -3.14%.

Data as of First Quarter 2012

AUNZ Top Ten Holdings
  1. Australia(Cmnwlth) 5.5%: 3.60%
  2. Australia(Cmnwlth) 5.25%: 3.59%
  3. Australia(Cmnwlth) 5.75%: 3.53%
  4. Australia(Cmnwlth) 5.5%: 3.48%
  5. Euro Inv Bk 5.375%: 3.39%
  6. Australia(Cmnwlth) 4.5%: 3.12%
  7. Australia(Cmnwlth) 4.25%: 3.10%
  8. Australia(Cmnwlth) 4.75%: 3.00%
  9. Asian Dev Bk 6%: 2.98%
  10. New Zealand(Govt) 6%: 2.82%

#8: PowerShares German Bund Futures ETF (BUNL )

BUNL follows the DB USD Bund Futures Index which is intended to measure the performance of a long position in Euro-Bund Futures. The underlying assets of Euro-Bund Futures are Federal Republic of Germany government issued debt securities (Bunds) with a remaining term to maturity of not less than 8 years and 6 months and not more than 10 years and 6 months as of the futures contract delivery date.

The fund was launched in March 2011. The expense ratio is .50%. AUM equal $30 million and average daily trading volume is less than 3K shares. As of late January 2012 there isn't an annual dividend available and YTD return was -.91%. The six month return was 8.49%.

Holdings are German Bund Futures contracts as described above.

#7: Van Eck Emerging Markets Local Currency ETF (EMCL)

EMLC follows the J.P. Morgan Government Bond Index Emerging Markets Global Core Index which tracks a basket of bonds issued in local currency by emerging market governments. The fund was launched in July 2010. The expense ratio is .48%. AUM equal $526 million and average daily trading volume is 173K shares. As of late January 2012 the annual dividend yield was 5.76% and YTD return 4.04%. The one year return was 2.22%.

 

Data as of First Quarter 2012

EMLC Top Ten Holdings
  1. Transnet Soc 10.8%: 2.98%
  2. Chile Rep 5.5%: 2.97%
  3. Rushydro Fin L 7.875%: 2.78%
  4. Eskom Hldgs Ltd, South Africa 9.25%: 2.44%
  5. Colombia Rep Euro Mtn Be Regs 12%: 1.98%
  6. Banco Do Brasil Sa Mtn Be Regs 9.75%: 1.97%
  7. Malaysia 4.378%: 1.96%
  8. Intl Bk Recon&Dv 6.5%: 1.84%
  9. Poland(Rep Of) 5.5%: 1.76%
  10. Peru(Rep Of) 7.84%: 1.73%

#6: iShares International Inflation-Linked Bond ETF (ITIP)

ITIP follows the BofA Merrill Lynch Global ex-US Diversified Inflation-Linked Index and is a broad, market value weighted, capped total return index designed to measure the performance of inflation-linked sovereign debt that is publicly issued and denominated in the issuer. The fund was launched in May 2011.

AUM equal $41 million and average daily trading volume is less than 7K shares. As of late January 2012 the annual dividend yield was 2.69% and YTD was 4.04%. The six month return was -6.65%.

Data as of First Quarter 2012

ITIP Top Ten Holdings Weightings
  1. France(Govt Of) 1.07943%: 4.68%
  2. Nota Do Tesouro Nacional 8/20 Fixed 6: 3.17%
  3. Nota Do Tesouro Nacional Notes 05/17 6.: 2.84%
  4. Bono Bco Cent Chile Uf Bonds 02/21 3.: 2.48%
  5. Tsy 2 1/2 2024i/L Stock Bonds 07/24 2.5: 2.34%
  6. Poland(Rep Of) 3.52047%: 2.30%
  7. Sweden(Kingdom Of) 4.1612%: 2.09%
  8. United Kingdom (Government Of) 1.46371%: 2.06%
  9. Sth Africa(Rep Of) 5.5%: 1.97%
  10. Nota Do Tesouro Nacional 08/50 Fixed 6: 1.88%

#5: SPDR DB International Government Inflation Protected Bond ETF (WIP)

WIP follows the DB Global Government ex-US Inflation-Linked Bond Capped Index measures the total return performance of inflation-linked government bonds from developed and emerging market countries outside of the United States. The fund was launched in March 2008.

AUM equal $1.2 billion and average daily trading volume is 129K shares. As of late January 2012 the annual dividend yield was 4.64% and YTD return 2.04%. The one year return was 4.79%.

Data as of First Quarter 2012

WIP Top Ten Holdings & Weightings
  1. Japan(Govt Of) 1.0857%: 4.64%
  2. Italy(Rep Of) 2.6%: 4.21%
  3. France(Govt Of) 2.56835%: 4.16%
  4. United Kingdom (Government Of) 1.44962%: 3.97%
  5. France(Govt Of) 1.07943%: 3.51%
  6. United Kingdom (Government Of) 2.05188%: 3.36%
  7. France(Govt Of) 1.78968%: 2.87%
  8. Turkey(Rep Of) 9.86678%: 2.82%
  9. United Kingdom (Government Of) 6.827%: 2.68%
  10. Republic Of South Africa: 2.53%

#4: iShares 1-3 Year International Treasury Bond ETF (ISHG)

ISHG follows the S&P/Citigroup International Treasury Bond Index ex-U.S. 1-3 Year which is designed to measure the performance of treasury bonds issued in local currencies by developed market countries outside the U.S. with a maturity of 1-3 years. The fund was launched in January 2009. The expense ratio is .35%.

AUM equal $164 million and average daily trading volume is 13K shares. As of late January 2012 the annual dividend yield was 4.52% and YTD return 1.73%. The one year return was -1.15%.

Data as of First Quarter 2012

ISHG Top Ten Holdings & Weightings
  1. Japan (2 Year Issue) Sr Unsecured 08/13 0.2: 5.43%
  2. Japan (2 Year Issue) Sr Unsecured 10/13 0.1: 5.42%
  3. Japan 27(20 Year Issue) Sr Unsecured 09/14 5.: 3.91%
  4. Italy(Rep Of) 4.75%: 3.28%
  5. Bundesrepub. Deutschland Bonds 07/14 4.25: 2.98%
  6. Japan(Govt Of) 0.6%: 2.88%
  7. Netherlands (Kingdom of) 4.25%: 2.73%
  8. United Kingdom (Government Of) 2.25%: 2.58%
  9. Buoni Poliennali Del Tes Bonds 11/13 2.25: 2.29%
  10. Ireland(Rep Of) 4%: 2.11%

#3: iShares S&P Citigroup International Treasury ETF (IGOV)

IGOV follows the S&P Citigroup International Treasury Bond Index ex-U.S. which includes Treasury bonds issued in local currencies. The fund was launched January 2009. The expense ratio is .35%. AUM equal $293 million and averaged daily trading volume is 27K shares. As of the end of January 2012 the annual dividend yield was 4.14% and YTD return -3.09%. The one year return was -.83%. More disappointing results were due to more exposure to the eurozone than BWX for example.

Data as of First Quarter 2012

IGOV Top Ten Holdings & Weightings
  1. Japan(Govt Of) 1.5%: 4.80%
  2. Japan(Govt Of) 2.2%: 4.52%
  3. Japan(Govt Of) 1.5%: 3.08%
  4. Germany (Federal Republic Of) 4.25%: 2.85%
  5. Netherlands (Kingdom of) 3.75%: 2.72%
  6. Austria(Rep Of) 3.4%: 2.23%
  7. Belgium(Kingdom) 3.25%: 2.19%
  8. Buoni Poliennali Del Tes Bonds 02/20 4.5: 2.17%
  9. Germany (Federal Republic Of) 4.75%: 1.88%
  10. United Kingdom (Government Of) 4.75%: 1.76%

#2: SPDR Short-Term International Treasury ETF (BWZ)

BWZ follows the Barclays Capital 1-3 Year Global Treasury Ex-US Capped Index which includes government bonds issued by investment-grade countries outside the United States, in local currencies, that have a remaining maturity of one to three years and are rated investment grade. The fund was launched in January 2009. AUM equal $219 million and average daily trading volume is 32K shares. As of late January 2012 the annual dividend yield was 3.50% and YTD return 1.94%. The one year return was 1.25%.

Data as of First Quarter 2012

BWZ Top Ten Holdings & Weightings
  1. Sweden(Kingdom Of) 6.75%: 2.44%
  2. United Kingdom (Government Of) 2.25%: 2.37%
  3. Japan 85 (5 Year Issue) Sr Unsecured 09/14 0.7: 2.24%
  4. Mexico(Utd Mex St) 8%: 2.18%
  5. Japan 84 (5 Year Issue) Sr Unsecured 06/14 0.7: 2.14%
  6. Sth Africa(Rep Of) 7.5%: 2.14%
  7. Germany (Federal Republic Of) 4%: 2.03%
  8. Germany (Federal Republic Of) 3.75%: 1.98%
  9. Japan(Govt Of) 1%: 1.91%
  10. Bundesrepub. Deutschland Bonds 07/14 4.25: 1.80%

#1: SPDR International Treasury Bond ETF (BWX)

BWX follows the Barclays Capital Global Treasury Ex-US Capped Index which includes government bonds issued by investment-grade countries outside the United States, in local currencies, that have a remaining maturity of one year or more and are rated investment grade.

 

The fund was launched in October 2007. The expense ratio is .50%. AUM equal $1.7 billion and average daily trading volume is 206K shares. As of late January 2012 the annual dividend yield was 3.35% and YTD return .68%. The one year return was 5.45%

.

Data as of First Quarter 2012

BWX Top Ten Holdings & Weightings
  1. Japan(Govt Of) 1.5%: 2.30%
  2. Japan(Govt Of) 2.3%: 2.00%
  3. Japan(Govt Of) 2.9%: 1.50%
  4. Japan(Govt Of) 2.6%: 1.16%
  5. Japan(Govt Of) 1.4%: 0.74%
  6. Denmark(Kingdom) 4.5%: 0.69%
  7. Japan(Govt Of) 1.9%: 0.69%
  8. Denmark(Kingdom) 4%: 0.68%
  9. Japan(Govt Of) 1.7%: 0.64%
  10. Japan 312 (10 Yr Issue) Sr Unsecured 12/20 1.2: 0.64%

This is a sector that should gain investor attention now and in the future. The eurozone dominates headlines with debt problems causing more volatility in the sector in the near to intermediate term. Meanwhile new entrants like EMLC, AUNZ and AUD will capture more attention given more attractive yields and fewer headline issues like we see from the eurozone. Some of the latter need more seasoning from a technical view but then longer index data is available for analysis but not from the charts we have available for posting at this time.

It's also important to remember that ETF sponsors have their own competitive business interests when issuing products which may not necessarily align with your investment needs. New ETFs from

For further information about portfolio structures using technical indicators like DeMark and other indicators, take a free 14-day trial at ETF Digest . Follow us on Twitter and Facebook as well and join our group conversations.

 

You may address any feedback to: feedback@etfdigest.com   

The ETF Digest maintains positions for Lazy and Active portfolios in BWX, AUNZ and EMLC.

( Source for data is from ETF sponsors and various ETF data providers)

 
This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

Dave Fry is founder and publisher of ETF Digest, Dave's Daily blog and the best-selling book author of Create Your Own ETF Hedge Fund, A DIY Strategy for Private Wealth Management, published by Wiley Finance in 2008. A detailed bio is here: Dave Fry.