Van Eck Launches Market Vectors® LatAm Aggregate Bond ETF (BONO)

New York-based asset manager Van Eck Global announced that it has launched Market Vectors LatAm Aggregate Bond ETF (NYSE Arca: BONO), an exchange-traded fund (ETF) that seeks to track, before fees and expenses, The BofA Merrill Lynch Broad Latin America Bond Index (LATS), an index consisting of a portfolio of sovereign and corporate debt securities issued by Latin American issuers and denominated in US Dollar, Euro and local currencies of the issuers.

 “Local debt markets in Latin America have been maturing quickly in recent years,” said Jan van Eck, Principal at Van Eck Global. “Governments have limited their reliance on borrowing abroad, infrastructure projects are proliferating throughout the region, and better transparency has led to improved sovereign credit ratings. These factors, coupled with the relatively high yields currently offered by Latin American bonds, have served to increase foreign investment demand for the region’s sovereign and corporate debt. With all of this in mind, we are pleased to be launching BONO.”

BONO carries a gross expense ratio of 0.56% and a net expense ratio of 0.49%. Expenses are capped contractually until September 1, 2012 and exclude certain expenses, such as interest.  As of April 30, the index included 453 constituents, had an average yield-to-worst of 7.27% with top country allocations as follows: Brazil 36.52%, Mexico 29.03%, Colombia 12.19%, Venezuela 6.50% and Argentina 4.17%. The index is market-cap weighted subject to a 20% cap on individual issuer exposures.

 BONO joins Van Eck’s newly established family of international debt ETFs.  “BONO, complements the Market Vectors Emerging Markets Local Currency Bond ETF (EMLC), allowing investors the opportunity to diversify their fixed income portfolio outside of the United States.  With U.S. interest rates near all-time lows, income-oriented investors may wish to expand their search to countries with higher yields,” said Ed Lopez, Director of Marketing at Van Eck.  Van Eck notes that investing in the debt of Latin American nations and corporations is not without risk, including the social, political and economic uncertainties that may grip the region. Currency risk, credit risk, and the fact that many of these local bond markets are still developing, potentially resulting in lower liquidity then developed markets.  

BONO is Van Eck’s 34th Market Vectors ETF and is the eighth of its fixed-income ETFs spanning municipal, international and corporate bond categories— Emerging Markets Local Currency Bond ETF (EMLC), High-Yield Municipal Index ETF (HYD), Intermediate Municipal Index ETF (ITM), Long Municipal Index ETF (MLN), Pre-Refunded Municipal Index ETF (PRB), Short Municipal Index ETF (SMB) and Investment Grade Floating Rate ETF (FLTR).