Deutsche Bank’s ETF platform, db X-trackers, has launched four new ETFs for professional investors who want daily leveraged exposure to US and British sovereign debt.
The London Stock Exchange-listed ETFs let investors implement daily double long or double short positions in UK Gilts and US Treasuries. They are suitable for financially sophisticated institutional investors implementing short-term trading or hedging strategies. As ETFs they are easy and convenient to use and can be traded and settled in the same way as any listed stock or security.
“These are easy-to-trade instruments for financially sophisticated institutional investors who want to take tactical leveraged or short positions on sovereign bond markets but do not necessarily have the infrastructure to use derivatives. They are the first of their kind to be launched in Europe,” says Manooj Mistry (pictured), head of db X-trackers for the UK.
The daily double long ETFs aim to provide twice the performance of the underlying long index minus a financing component, with daily re-balancing. The daily double short ETFs aim to provide twice the performance of a short position in the underlying long index, plus a money market component, with daily rebalancing. The indices reference underlying bonds across the full range of the yield curve.
“Bond futures contracts often represent exposure to only one specific point of the yield curve. The new ETFs will be useful for investors who want to take a view on the entire bond market,” says Mistry. “This is especially the case for UK Gilts, where we estimate around 40% of the market is not covered by liquid futures. These products are a liquid way to access this portion of the market.”
The ETFs complement the previously launched db x-trackers UK Gilts Short Daily ETF, and the db x-trackers US Treasuries Short Daily ETF, which provide unleveraged short exposure to the US and UK sovereign debt markets, as well as the db x-trackers II iBoxx Gilts Total Return Index ETF, and the db x-trackers II iBoxx $ Treasuries Total Return Index ETF, providing unleveraged long exposure.
