As a bond ETF does not mature

0FXTrader0

Established member
552 86
As the bond ETFs don't mature are you holding the bag when rates rise or do they have some kind of maturity based on the Weighted Avg Maturity.

IGLT Weighted Avg Maturity 15.75 yrs after holding the ETF for this long is the return likely to be same as if holding a 15 year Gilt till maturity.
 

new_trader

Legendary member
6,664 1,489
You need to read the prospectus and/or product disclosure statement to find out how the ETF is structured and exactly which bonds it is holding. My guess is that the Weighted Avg Maturity changes over time depending on the holdings.
 

0FXTrader0

Established member
552 86
Not read anything about this in the KIID. It seems there always adding and maturing bonds within the ETF. But I'm interested in holding a bond till maturity as that takes away the interest rate risk to prices. Not sure if that's possible with an ETF.
 

new_trader

Legendary member
6,664 1,489
If you buy a Gilt and hold until maturity your capital and coupon payments are guaranteed. However the value of the ETF is going to fluctuate in line with market conditions for Gilts, so holding a Gilt ETF for 15 years is not the same thing as holding the underlying 15 year Gilts.
 
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0FXTrader0

Established member
552 86
That's what I thought as well. They will perform poorly when this interest rate cycle picks up.
 
 
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