A Look at Japanese Bond ETFs

September 4, 2013

There has been a ton of focus on the Japanese equity market and access to it via ETPs such as the $10.4 billion DXJ (WisdomTree Japan Hedged Equity, Expense Ratio 0.48%) and the $10.8 billion EWJ (iShares MSCI Japan, Expense Ratio
0.51%) each of which have impressively reeled in $8.4 and $4.6 billion in new assets just year to date.

However, what about the Japanese bond market in 2013, for we have not heard much about it in terms of how one might access the space via ETPs.

There is probably good reason for this, as there are only four ETPs listed in the U.S. currently that are dedicated to focused Japanese bond exposure, and three of these four are either leveraged, inverse, or both. JGBL (PowerShares DB Japanese Government Bond Futures ETN, Expense Ratio 0.50%) debuted in March of 2011 and currently has $5.2 million in assets under management while averaging about 9,600 shares traded on an average daily basis.

It is fair to say that it has evaded the radars of most institutional managers judging by its fund size thus far. JGBL intends to track the DB USD JGB Futures Index, which is a measure of the performance of taking a long position in 10-year JGB futures.

The underlying bonds in this index are issued by Japan’s government and typically have a term to maturity between 7-11 years.

Thus far, the “bear” play on Japanese bonds, JGBD (PowerShares DB 3X Inverse Japanese Government Bond Futures, ETN, Expense Ratio 0.95%) has been the most popular of the funds in this category, having raised $52 million in assets and averaging a healthy 53,000 shares daily.

PowerShares also offers a leveraged bull ETP in this space, JGBT (PowerShares DB 3X Japanese Government Bond Futures ETN, Expense Ratio 0.95%) as well as JGBS (PowerShares DB Inverse Japanese Government Bond Futures ETN, Expense Ratio 0.50%) which does not utilize leverage in providing inverse exposure to the DB USD JGB Futures Index, and may be of use to institutional hedgers for example.

For more information on Street One ETF research and ETF trade execution/liquidity services, contact Paul Weisbruch at pweisbruch@streetonefinancial.com.

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