State Street's new ETFs target crossover bonds, emerging market debt

By Toni Weeks

San Diego, June 19 - State Street Global Advisors announced in a press release the launch of the SPDR BofA Merrill Lynch Crossover Corporate Bond exchange-traded fund and the SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF. The new ETFs began trading on the NYSE Arca on Tuesday under the symbols "XOVR" and "EMCD," respectively.

Crossover ETF

The SPDR BofA Merrill Lynch Crossover Corporate Bond ETF seeks to track the performance of the BofA Merrill Lynch US Diversified Crossover Corporate index, which is designed to measure the performance of dollar-denominated corporate debt publicly issued in the U.S. market. Index securities must be rated BBB1 through BB3, based on an average rating of Moody's Investors Service, Standard & Poor's and Fitch Ratings.

Index securities must also have a fixed-income coupon schedule, at least one year remaining to final maturity and a minimum $250 million outstanding of issuance. As of May 31, about 3,029 securities were included in the index.

The ETF's expense ratio is 0.3%.

"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 advisers and investors during this extended low-yield environment," senior managing director and global head of SPDR ETFs James Ross said in the release.

Emerging markets ETF

The SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF seeks to track the performance of the BofA Merrill Lynch Emerging Markets Large Cap Senior Corporate index, which is designed to measure the performance of dollar-denominated emerging market corporate senior and secured debt publicly issued in the U.S. market and eurobond market.

The index's securities must be denominated in dollars and be senior or secured debt to be included in the index. They must also have at least one year remaining to maturity, a fixed coupon and $500 million in outstanding face value. About 454 securities were included in the index as of May 31.

The ETF's expense ratio is 0.5%.

"The SPDR BofA Merrill Lynch Emerging Markets Corporate Bond ETF provides investors with an opportunity to tap into the growth potential of emerging markets while minimizing exposure to emerging market currencies," Ross said in the release.

Boston-based SSgA Funds Management, Inc. is the investment manager for the ETFs.

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