Pimco and Source launch liquid Bund ETF

Pimco and Source have launched an ETF aiming to track the €1.1trn German government bond market, in an attempt to allow investors nervous about whether high prices on German debt are set to fall, to exit positions quickly if need be.

Ten-year Bunds this morning yielded 1.59%, well above recent lows of 1.17% they hit in 1 June, after holders sold off the debt since Eurozone leaders agreed a number of stabilising measures for indebted countries and struggling banks late last week.

Despite this, yields on German long-term debt have fallen fairly uninterrupted since the start of 2010.

The PIMCO German Government Bond Index Source ETF will track the Markit iBoxx Euro Germany index, without drawing on practices such as securities lending.

Ted Hood, Source’s CEO, said: “When investors look to reduce risk, the structure behind the investment vehicle – how it generates its returns – is as important as the choice of asset class.”

Michael Surowiecki, senior vice president at PIMCO and portfolio manager of BUND, said: “German government bonds are a core investment position in most Europeans’ portfolios, and the BUND ETF provides access to PIMCO’s index replication and trade execution capabilities in government bonds.”

The product carries a management fee of 0.15% per annum.

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