Solactive launches Australian Bank Senior Floating Rate Bond Index


Solactive AG announced it has entered for the first time the Asia-Pacific region with a new index in the fixed-income space, the Solactive Australian Bank Senior Floating Rate Bond Index, aimed to be tracked by the BetaShares Australian Bank Senior Floating Rate Bond ETF (ASX: QPON).

The index targets the largest and most liquid floating rate AUD- denominated debt securities issued by selected Australian banks. The index is composed in such a way that at least 80% of the assets are tracking floating rate bonds issued by the four largest Australian banks, and up to 20% are linked to issues by the large ‘regional’ banks.

QPON is the first ETF in Australia to offer exposure to a diversified portfolio of bank floating rate bonds in one trade on the ASX.

Floating rate bonds expose investors to variable interest payments tied to a reference benchmark. The variable coupon feature provides a layer of protection from rising interest rates, as bond yields fluctuate in relation to the benchmark. In the case of Australia, the Reserve Bank of Australia has adopted a low interest policy, with rates set at historic lows. In this context, the index may appeal to fixed-income investors who are foreseeing a potential rate increase in the future. In addition, due to their floating interest rate structure and high credit quality, these bonds tend to offer an income premium over traditional cash and short- term deposit products for only marginally greater interest rate risk and credit exposure.

Steffen Scheuble, CEO, Solactive, commented:

We are happy of working together with BetaShares to provide cost-efficient access to Australian banks’ floating rate bonds. The launch of the Solactive Australian Bank Senior Floating Rate Bond Index demonstrates that we are capable of responding to the needs of an increasingly international customer base and expand our footprint globally.

Alex Vynokur, Managing Director, BetaShares, added:

We believe QPON has an important role to play in investment portfolios given the current interest rate climate. Demand for the strategy has been strong in Australia, and, with the strategy paying income of ~2.9% before fees at the time of writing along with very low historical capital volatility from Australian bank floating rate bonds, we believe that QPON will also receive interest from investors in other geographies such as Europe and Asia. We are proud to be continuing to innovate the ETF industry by expanding the range of investing solutions available.

The index is calculated as a total return index. The bonds included in the index are senior bonds, denominated in AUD and issued by Australian banks. The minimum amount outstanding for inclusion in the index must be of at least AUD 500 million and the time to maturity of between 1 to 5 years. The index is currently composed of 13 floating rate bonds.

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