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A new Canadian ETF is offering investors tax-efficient exposure to the U.S. mid-term treasuries market.
Horizons ETFs Management (Canada) Inc. has introduced the Horizons US 7-10 Year Treasury Bond ETF (HTB) which seeks to replicate the performance of the Solactive US 7-10 Year Treasury Bond Index, a rules-based index designed to measure the performance of the US 7-10 Year Treasury Bond market.
U.S. treasury bonds represent $12.5-trillion (U.S.) in assets in North America, as of Feb. 1, 2015. Typically, mid-term treasuries offer higher yields than short-term bonds (under five years), but have lower interest-rate risk than longer-term bonds (with time horizons greater than 10 years).
Management fees for HTB are 0.15 per cent.
In addition, the ETF includes a total return swap (TRS) structure, which provides tax efficiency to investors. Typically, taxes charged on interest income from bond ETFs can eat into overall returns. With a TRS structure, investors don't receive distributions directly and thus, lessens the taxes they can be charged for holding it.
Clare O’Hara