Following the introduction of corporate bond futures, Eurex – a part of Deutsche Börse Group – once again acts as first mover in the fixed income derivatives markets. To further support the financial industry in hedging their portfolios, Europe’s leading derivatives exchange launches options on fixed income ETFs. As of November 20, Eurex will offer options on three products:
- iShares USD High Yield Corporate Bond ETF;
- iShares J.P. Morgan USD Emerging Market Bond ETF; and
- iShares USD Corporate Bond ETF.
The launch is expected to be well supported as Eurex responds to strong client demand.
The growth of fixed income ETFs in Europe has broadened the range of investors and the way they use our ETFs. These investors are telling us they need options on our fixed income ETFs, to provide a way to manage volatility in portfolios using a tool that is more representative of the cash bond market “, says Brett Olson, Head of Fixed Income iShares in EMEA for BlackRock. „With one eye on the growth in the US fixed income ETF options market, we believe these options will benefit clients that require a security that refers to a UCITs ETF.
Fixed income ETFs offer an exchange traded source of liquidity for fixed income exposure to investors”, adds Lee Bartholomew, Head of Fixed Income & FX Product R&D at Eurex. “They allow for cost effective exposure to the corporate bond market. Furthermore, our new products provide investors with greater flexibility to hedge and manage their exposure to the fixed income, corporate and high yield bond markets.
The European market for corporate bonds plays a key role in the financial ecosystem. It has grown consistently after the financial crisis, both in terms of market participants as well as overall assets under management. Eurex notes significant end user demand for European-listed FI ETF options, with institutional investors in Europe ready to migrate from US-listed options once the options are listed.
Three large banks will provide liquidity for Eurex‘ options on fixed income ETFs.