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SSgA launches new fixed income SPDR ETFs

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State Street Global Advisors has launched the SPDR BofA Merrill Lynch Crossover Corporate Bond ETF (symbol:XOVR) and the SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF (symbol:EMCD) on the NYSE Arca.

The new SPDR ETFs provide investors with an opportunity to access the attractive yield and total return potential of crossover bonds and emerging market corporate debt.

The SPDR BofA Merrill Lynch Crossover Corporate Bond ETF seeks to track the performance of the BofA Merrill Lynch US Diversified Crossover Corporate Index. The Index is designed to measure the performance of US dollar-denominated BBB and BB corporate debt publicly issued in the US domestic market. "Crossover" corporate debt generally means corporate debt rated at levels where the lower end of investment-grade debt and the higher end of high-yield debt meet. Qualifying securities must be rated BBB1 through BB3 inclusive (based on an average rating of Moody’s Investors Service Inc., Standard & Poor’s Inc and Fitch, Inc.) have a fixed income coupon schedule, have at least one year remaining to final maturity, and a minimum amount of outstanding of USD250 million or more of issuance.

Index constituents are segmented into two groups: those rated between BBB1 and BBB3, inclusive, and those rated between BB1 and BB3, inclusive. Within these two groups, issues are capitalisation-weighted and each group is assigned a 50 percent weight in the overall index – with a two per cent cap on each issuer. As of 5/31/2012 approximately 3029 securities were included in the index. The SPDR BofA Merrill Lynch Crossover Corporate Bond ETF’s expense ratio is 0.30 per cent.

"Featuring potentially higher yields than most investment grade bonds and potentially less credit risk than most high yield issues, demand for crossover bonds is growing among financial advisors and investors during this extended low-yield environment," says James Ross (pictured), senior managing director and global head of SPDR Exchange Traded Funds at State Street Global Advisors. "With the launch of the SPDR BofA Merrill Lynch Crossover Corporate Bond ETF, precise, cost-efficient access to this asset class is within reach for investors seeking exposure that spans both investment grade and high-yield bonds."

 

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