BlackRock Australia has announced its intent to launch the iShares 20+ Year US Treasury Bond ETF (AUD Hedged) (ULTB), offering Australian investors more precise fixed income investment options for their portfolio.
ULTB, which is expected to list on the ASX early next month, aims to provide targeted exposure to long-end US Treasury bonds, benchmarked to the ICE US Treasury 20+Year Bond AUD Hedged index.
BlackRock confirmed that the fund represents the longest duration exposure available within the locally listed iShares product range and noted that investors may consider ULTB for portfolio diversification as adding duration can provide defence against potential market volatility and during periods of slowing growth.
“We have added ULTB to our local iShares product range, responding to Australian advisers and investor demand for more choice when it comes to precise fixed income exposures,” James Waterworth, director for wealth distribution at BlackRock Australasia, said.
“Bond yields globally are at decade-highs, and if inflation indicators continue to fall, central banks may proceed to cut official cash rates. We believe investors have a window of opportunity to move out of cash and into fixed income exposures to lock in these higher yields, because the market has tended to price in changes to cash rates well before they occur,” Waterworth said.
This, he explained, can be achieved by long-end bond exposures like ULTB, which has a management fee of 0.15 per cent, enabling Australian investors to add duration in a simple and low-cost way.
Tamara Stats, iShares and index investments specialist at BlackRock Australasia, said the firm is pleased to now offer access to long-end US Treasury bond exposures to Australian investors, bringing one of its flagship exposures to the local market.
“US Treasury bonds are considered one of the highest quality assets due to their low level of default risk, offering defensive benefits to the broader portfolio. The historic inverse relationship between stocks and bonds has been challenged in recent years,” Stats said.
“As inflation starts to return to target, we may see the historic correlation restored. Therefore, ULTB could be a very useful tool for portfolio diversification.
“Hedged to the Australian dollar, ULTB also offers Australian investors an additional layer of stability without having to weather the ups and downs of foreign exchange risk.”
ULTB is the latest addition to BlackRock's iShares fixed income ETF offering, and in June also introduced the iShares 15+ Year Australian Government Bond ETF (ASX: ALTB) in a bid to expand its local product suite.
