Laurent Kssis at LaBranche Structured Products Europe (LSPE) discusses European ETF trades for the week ending 10 December
Investors spent last week taking profit from positions built up in corporate bond ETFs following good performance through the year. iShares saw over €100m redeemed in its Markit iBoxx Euro Corporate Bond, Markit iBoxx $ Corporate Bond and GBP Corporate Bond ETFs.
Increased confidence that Europe's debt problems will not affect the global economy, global retail sales and an improved rate of home purchases in the US are all helping to revive the bond market.
As corporate earnings surge and the economic recovery continues, Moody's reported in November that global junk-grade default rates had hit a two-year low of 3.3%, anticipating a potential fall to 2.9% by the end of the year and 1.8% this time next year.
The SPDR Barclays Capital High-Yield Bond ETF currently yields 8.44%, while the iShares iBoxx $ High Yield Corporate Bond ETF and Euro High Yield ETF yield 7.97% and 7.23% respectively, and the PowerShares Fundamental High Yield Corporate Bond ETF yields 6.77%.
In equity, the underperformance of Europe has left the Eurostoxx 50 index at around 6% below its year-to-date high, while US indices create new multi-year highs.
Emerging markets ETFs are also continuing strongly, attracting abundant creation orders from LSPE clients, to keep the creation/redemption ratio at 13:2. LSPE's primary market volumes are 35% down on the previous week, when levels were boosted by month-end inventory management, but secondary volumes have remained much the same.
Despite concerns over the European market, certain Stoxx Europe 600 sector ETFs had a successful week. In particular, LSPE saw large buyers in Stoxx 600 bank, oil and basic resources sector ETFs, as well as sellers in utilities sector ETFs.
The company also saw significant interest in ETF Securities' All Commodities DJ-UBSCI ETC, which may have benefited off a broker's recommendation.
The latter end of this current week may see higher volatility on weak volumes, with South Africa's exchanges closing tomorrow and Friday being the date for many index rebalances and futures expiries.
This report is not an offer to sell or a solicitation of any investment products or other financial product or service, an official confirmation of any transaction, or an official statement of LSPE.
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