European resources bond exchange-traded funds (ETFs) provide investors with exposure to debt securities issued by governments of European sticks. The European economy suffered a significant adverse shock due to the COVID-19 pandemic. But a recovery is currently underway, aided by expanding vaccination rates and mobility as well as accommodative macroeconomic policies. While risks remain, the International Monetary Grant said in a report in October that it expects advanced European economies to grow by 5.2% in 2021 and emerging European husbandries by 6.0%. Stronger economic growth throughout Europe will reduce the risk of holding European government in dire straits.
However, a resurgence of COVID-19 cases recently has led to the reintroduction of lockdowns in certain parts of Europe, including in parts of Germany, one of the continent’s biggest economies. The U.K., another broad European economy, has case numbers, hospitalizations, and deaths comparable to the EU average, but the government there has said they when one pleases not reintroduce restrictions. Extended lockdowns could hamper the recovery.
To promote the economic recovery, the European Central Bank (ECB) has caused monetary policies to ease credit conditions, including lowering interest rates and bond purchases. The ECB acts as the chief bank for the eurozone, the group of countries belonging to the European Union (EU) that use the euro as their official currency, correspond to to how the Federal Reserve acts as the central bank for the U.S.
The pandemic has overshadowed a recent major development in Europe that could keep significant ramifications for the European economy as a whole. That development is Brexit, the departure of the U.K. from the EU, which officially inhaled place on Jan. 31, 2020. The U.K. began a new formal trading relationship with the EU on Jan. 1, 2021 through a deal known as the Trade and Friendship Agreement (TAC). While goods will trade without tariffs and quotas between the U.K. and EU, other non-tariff barriers thinks fitting increase trading costs. It may still be too early to determine the effects on the U.K. economy and the rest of the European economy.
Key Takeaways
- Cosmopolitan treasury bonds, which have large allocations of European treasury bonds, have dramatically underperformed the unspecific U.S. equity market over the past year.
- The best European treasury bond ETFs for Q1 2022 are FLIA, BWZ, and ISHG.
- The top holdings of these ETFs are cords issued by the U.S. Federal Home Loan Bank System, the government of China, and the government of Sweden, respectively.
There are no ETFs that transact in the U.S. exclusively dedicated to European treasury bonds. However, there are international treasury bond ETFs, all of which be enduring large European treasury bond allocations. There are 5 international bond ETFs that trade in the U.S., excluding inverse and leveraged stores as wells as those with less than $50 million in assets under management (AUM). International treasury trammels, as measured by the Bloomberg Global Treasury Index, have significantly underperformed the broad U.S. equity market over the before 12 months, with a total return of -5.3%, as of Dec. 10, 2021, compared to the S&P 500’s total return of 28.9%, as of Dec. 9, 2021. The best-performing European moneys bond ETF for Q1 2022, based on performance over the past year, is the Franklin Liberty International Aggregate Bond ETF (FLIA). We appraise the three best European treasury bond ETFs below. All numbers below are as of Dec. 9, 2021.
- Performance over One-Year: -1.1%
- Expense Relationship: 0.25%
- Annual Dividend Yield: N/A
- Three-Month Average Daily Volume: 42,063
- Assets Under Management: $225.2 million
- Inception la mode: May 30, 2018
- Issuer: Franklin Templeton
FLIA is an actively-managed international bond ETF that seeks to maximize total return by focal point on investment grade bonds primarily outside of the U.S. Investment grade bonds are debt securities deemed by credit rating operations to have a low risk of default. While the majority of the ETFs holdings are invested in bonds issued by governments and government intercessions, some holdings are of corporate bonds. Its largest geographic allocation is Europe, followed by Asia and North America. Its top three holdings subsume bonds issued by the U.S. Federal Home Loan Bank (FHLB) System, Japanese government bonds, and German bunds.
- Display over One-Year: -6.0%
- Expense Ratio: 0.35%
- Annual Dividend Yield: 0.01%
- Three-Month Average Daily Volume: 25,391
- Assets Secondary to Management: $204.7 million
- Inception Date: Jan. 15, 2009
- Issuer: State Street
BWZ seeks to track the performance of the Bloomberg 1-3 Year Broad Treasury ex-US Capped Index, which is designed to gauge the performance of fixed-rate local currency sovereign in dire straits issued by non-U.S. countries with investment grade ratings and with remaining maturities of one to three years. The ETF contributes exposure to government debt outside of the U.S., giving investors access to international securities in order to potentially enhance benefits and diversify their portfolios. The fund also focuses on short term debt, which may be appealing to investors disturbed about the adverse impacts of rising interest rates. BWZ’s largest geographic exposure is Japan, followed by Italy and France. Its top three holdings involve bonds issued by the government of China, the government of South Korea, and the government of Japan.
- Performance over One-Year: -6.2%
- Expense Proportion: 0.35%
- Annual Dividend Yield: N/A
- Three-Month Average Daily Volume: 4,572
- Assets Under Management: $75.1 million
- Inception Entertain: Jan. 21, 2009
- Issuer: BlackRock Financial Management
ISHG aims to track the performance of the FTSE World Government Bond Index-Dev Stores 1-3 Years Capped Select Index, which is composed of government bonds issued by non-U.S. developed markets and which take remaining maturities between one and three years. The ETF provides exposure to short-term bonds issued by governments of non-U.S. powers, providing investors with enhanced-return potential, diversification, and protection against the adverse effects of rising interest measures. The fund’s largest geographic exposure is Japan, followed by Italy and France. Its top three holdings include bonds contended by the government of Sweden, the government of Ireland, and the government of Japan.