Module 4

ON COMPLETION OF THIS MODULE, THE SUCCESSFUL PARTICIPANT WILL BE ABLE TO:

• Differentiate between different kinds of fixed income ETFs based on the credit quality of the underlying constituents
• Describe the various ETFs that track sovereign bonds in developed and EM economies
• Provide an explanation and examples of a bond index
• Describe the concerns within the market place regarding liquidity of ETFs that are based on underlying high yield debt instruments
• Describe how to US Treasury based ETFs to trade the US government bond yield curve

SKILLS
THIS MODULE WILL CALL FOR THE SUCCESSFUL PARTICIPANT TO:

• Explain the nature of total return as applicable to the fixed income asset class
• Explain how bond-based ETFs have different behaviour to actual bonds
• Contrast between sovereign based bond ETFs and corporate based bond ETFs
• Describe how to implement a forex hedge with an ETF that tracks a G10 currency

• Nature of the yield curve – term structure of interest rates
• Total return characteristics – coupon plus capital gain/loss
• Review of US Treasury ETFs
• Special case of zero coupon fixed income instruments
• Explanation of how bond-based ETFs have different behaviour to actual bonds

• Using US Treasury based ETFs to trade the US government bond yield curve

• Distinguish between investment grade and sub-investment grade debt instruments
• Explanation of credit quality and credit risk within the fixed income universe
• Contrast between sovereign based bond ETFs and corporate based bond ETFs
• Review of ETFs which track investment grade corporate bond indices
• Review of ETFs which track high yield corporate bond indices

• Liquidity issues with ETFs that are based on underlying high yield debt instruments
• Examination of the features and performance of HYG and JNK
• Actions of the US Federal Reserve in buying HY funds during Q1, 2020

• Overview of the nature of FX markets and different investment vehicles
• Overview of the nature of the commodity futures market
• Review of ETFs which track foreign currencies – how they are constructed
• Review of ETFs which track commodities – synthetic replication

• Use case for forex hedging with an ETF that tracks a G10 currency