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India’s US Debt ETF is renamed


Bandhan Mutual Fund, which recently announced the name change for all its schemes, following the rebranding of the fund house, confirmed that the recently launched India’s First US Debt (ETF) Fund name has changed to Bandhan US Treasury Bond 0-1 Year Fund of Fund. 

The firm explains that the fund is an open-ended fund of fund scheme investing in units /shares of overseas index funds and/or ETFs which track an index with US treasury securities in the 0-1 year maturity range as its constituents. The firm writes that the fund is designed to provide Indian investors with a convenient route to create a USD asset that benefits from the relatively high quality, reasonable safety, and current high yield of US Treasuries. 

Highlighting why investors should consider including Bandhan US Treasury Bond 0-1 year Fund of Fund in their portfolio, Mr. Vishal Kapoor, CEO of the AMC says: “Bandhan US Treasury Bond 0-1 year Fund of Fund seeks to provide investors the opportunity to create a USD asset for funding a near-term or defined expense, without wanting to take any equity market-linked volatility. The fund invests in US Treasuries with 0-1 year maturity, which means it offers a much-needed blend of relatively high-quality and low-volatility investment opportunity. Currently, mutual funds offered global diversification via equity-oriented funds, but this fund is another step in offering opportunities via debt-oriented fund. Additionally, the spread between the US and India’s one-year government bond yields has narrowed significantly from ~390 bps to ~227 bps since February 2022, clearly demonstrating that exposure to US treasury bonds is relatively more attractive for Indian investors.”

The firm writes that for Indian investors, global diversification has been synonymous with investing in the equity market of the US or any other major economy. However, amidst a probable slowdown across most economies globally, with a risk-off sentiment, investors globally prefer the US treasuries which are considered the highest quality asset class (Fitch AAA rated vs India sovereign rating of BBB-). 

“This highest quality asset class now also offers relatively attractive yields, with US treasuries maturing within one year now at about 5 per cent up from less than 1 per cent a year ago. 0 to one year could be considered a sweet spot for investment owing to the higher yields being offered vs the longer-term securities. This relatively higher USD return can be further complemented by any weakening in the INR currency vs the US dollar, as has been witnessed in 9 out of the last 10 calendar years,” the firm says. “While current times are opportune for Indian investors for investing in US securities, it is important to consider this asset class for ongoing allocation as suitable to an investor’s portfolio from a risk management perspective.”

Bandhan US Treasury Bond 0-1 year Fund of Fund intends to invest in an overseas fund with exposure to 0-1 year US treasuries, currently via the JPMorgan BetaBuilders US Treasury Bond 0-1 year UCITS ETF. The fund will be benchmarked against the ICE 0-1 Year US Treasury Securities Index.

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