Update: This ETF launched on Wednesday, Mar. 19. Here's a link to the relevant page on SSGA's site, where you can find additional data on the fund, etc. For what that's worth.
SSGA made what appears to be its final filing for SPDR DB International Government Inflation-Protected Bond (ticker: WIP). I spoke briefly to an SSGA rep about the fund, which he said would probably begin to trade next week.
The fund would be the first U.S.-listed international inflation-indexed ETF to trade. It joins iShares Lehman TIPS and stablemate SPDR Barclays Capital TIPS as the only inflation-protected bond ETFs listed in the U.S.
Unless we're misreading the filings, it appears that SSGA changed the fund's mandate (from global to foreign-only) and index-provider (Barclays Capital to Deutsche). Previously, the fund was slated to track the Barclays World Government Inflation-Linked Bond Index. Now it will track the DB Global Government ex-U.S. Inflation-Linked Bond Capped Index. Per the prospectus, that DB index spanned 18 countries (developed and emerging) and 114 different issues as of Dec. 31, 2007. Here's how the filing describes the index...
The Index measures the total return performance of inflation-linked government bonds from developed and emerging market countries outside of the United States. The Index includes government debt (direct obligations of the issuer country) but does not include quasi-government debt or corporate debt. The securities are denominated in and pay coupon and principal in the domestic currency of the issuer country. Each of the component securities in the Index is a constituent of the DB Global Government ex-US Inflation-Linked Bond Index screened such that the following countries are included: Australia, Brazil, Canada, Chile, France, Germany, Greece, Israel, Italy, Japan, Mexico, Poland, South Africa, South Korea, Sweden, Turkey, Uruguay and the United Kingdom. In addition, the securities in the Index must be inflation-linked and have certain minimum amounts outstanding, depending upon the currency in which the bonds are denominated. To be included in the Index, bonds must: (i) be capital-indexed and linked to an eligible inflation index; (ii) have at least one year remaining to maturity at the Index rebalancing date; (iii) have a fixed, step-up or zero notional coupon; and (iv) settle on or before the Index rebalancing date. As of December 31, 2007, the modified adjusted duration of securities in the Index was 9.17 years.
And here's how they'll weight the securities...
The Index is weighted based on the total market capitalization represented by the aggregate component securities within the Deutsche Bank Global Government ex-US Inflation-Linked Bond Capped Index, subject to the following asset diversification requirements: (i) the market capitalization-based weighted value of any single constituent country measured on the last day of a calendar month may not exceed 24.99% of the total value of the Index; and (ii) with respect to 50% of the total value of the Index, the market capitalization-based weighted value of the constituent countries must be diversified so that no single constituent country measured on the last day of a calendar month represents more than 4.99% of the total value of the Index. The modified constituent country weight calculated above is then applied to the individual securities of each country.
As for price tag, the fund will cost 0.50% per year, all of which is management fee(though the management fee includes about 5 bps worth of admin and custody costs....those admin fees terrace down...so how come there's no breakpoints on the management fee itself?...just asking). That's consistent with SPDR Lehman International Treasury and a tad cheaper than the two emerging markets bond ETFs that are live. But it's roughly double the cost of the two domestic inflation-protected bond ETFs that are available.
To our knowledge, there are no other foreign bond ETFs, let alone international inflation-indexed bond ETFs, in the offing. As such, State Street should get a good head-start on the competition, provided the demand is there for the product.