Chinese government bonds from State Street
State Street has become the third European ETF issuer to launch a Chinese government bond ETF this year.
The SPDR Bloomberg Barclays China Treasury Bond UCITS ETF (CHNT), which has listed across European exchanges this week, buys China’s onshore bonds, denominated in its local currency the renminbi.
The SPDR Bloomberg Barclays China Treasury Bond UCITS ETF (CHNT), which has listed across European exchanges this week, buys China’s onshore bonds, denominated in its local currency the renminbi.
State Street joins BlackRock and Goldman Sachs, which blazed the trail by launching Chinese government bond ETFs earlier this year to positive investor receptions.
CHNT will track the Bloomberg China Treasury 100BN index, which is made of onshore bonds that are sufficiently large and liquid.
Chinese onshore government bonds are mostly traded and owned by Chinese banks. Many of these banks are, in turn, owned by the Chinese government.
CHNT charges a 0.19% management fee, making it the cheapest of its kind.
Bernie’s commentary – Renminbi bonds are smart
Chinese bonds offer good value, and this ETF is no exception.
At the time of writing, renminbi treasury bonds provide double the yield to maturity of UK gilts and US treasuries. And do so while providing less duration risk. Making things better still, the Chinese economy is doing much better than the US and the UK’s. It is growing faster, and debt levels are much lower.
The only thing holding back investment in China, in my view, is the media. Press coverage of China in mainstream newspapers and TV stations is almost always negative.
Nonetheless, the smart money sees through the negative press, and is jumping in. The iShares China CNY Government Bond UCITS ETF (CGBI) now has more than $1.8 billion in assets, despite only launching in April this year. Other Chinese bond ETFs are also swelling their assets. The inclusion of Chinese shares and bonds in global indexes is expected to increase in coming years, as more investors get comfortable with China.
There is a lot to like about this new ETF. It is also interesting to see how that despite the OFAC sanctions there is still external interest in the Chinese machine.