CSOP has listed the FTSE US Treasury 20+ Years Index ETF (UST20, 3433.HK) on the Hong Kong Stock Exchange as Hong Kong’s first US Treasury 20+ Years ETF.
The firm writes that to capture the performance of FTSE US Treasury 20+ Years Index, 3433.HK adopts a representative sampling strategy, with listing price at around HKD 78 per unit, and trading lot of 10 and management fee of 0.20 per cent. The Unlisted Share Class A of the ETF was also launched with minimum initial investment of USD1,000. 3433.HK has received USD50 million initial investment.
The firm writes that in the first half of 2023, bond ETFs attracted an inflow of USD160.1 billion, emerging as the best-selling asset type worldwide.
“Notably, USD Government Bond ETFs led the pack, securing the largest inflow of USD71.6 billion. This surge was largely propelled by an aggressive monetary tightening policy that pushed the federal fund rate to its highest level since 1981, between 5 per cent and 5.5 per cent. Consequently, US Treasury Bonds, often described as “risk-free” assets, yielded higher returns than the S&P 500 and emerging markets government bonds, which typically have higher risk profiles.
“Anticipations are high for rate cuts in 2024. US Treasury Bonds often benefit from rate decreases during periods of monetary easing due to the inverse relationship between bond values and rates. The FTSE US Treasury 20+ Years Index saw a total return of 24.7 per cent, an annualized return of 42.2 per cent, during the rate-cutting periods of July 2019 to March 2020. Bonds with higher durations typically increase more in value. Given the current high interest rates and the expected policy shifts, it presents an opportune moment to consider long duration. However, accessing the US Treasury Bonds market directly often poses challenges for Hong Kong retail investors, including wide bid-ask spreads, high costs, low transparency, and high foreign exchange costs.”
CSOP writes that the FTSE US Treasury 20+ Years Index ETF emerges as an efficient solution for retail investors seeking to invest in the US Treasury Bonds. It offers ease of transaction and high transparency. FTSE US Treasury 20+ Years Index measures the performance of the US Treasury securities, all rated investment grade, with maturity greater than or equal to 20 years that are in the FTSE World Government Bond Index. The Index is a total return index, meaning that the performance of the index includes both coupon and principal return derived from US Treasury Bonds. It has an average coupon rate of 2.68 per cent, average yield to maturity of 4.63 per cent with effective duration of 16.81.
Ding Chen, CEO of CSOP Asset Management, says: “Since our establishment in 2008, CSOP has been committed to providing high-quality and innovative investment tools to Asian investors. Today, we are proud to introduce the first long-term US Treasury Bonds ETF to Hong Kong. This allows investors to easily access the US Treasury Bonds market in a flexible and transparent manner.”
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