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How to gain exposure to government bonds through ETFs

by , 12 May 2015

If you're looking to invest in government bonds, one of the easiest ways it through RSA Retail Savings Bonds.

But you have other options. You could look to invest in exchange traded funds (ETFs). Some of these ETFs track the performance of government bonds.

So how do these ETFs work? What are your options? And how can you invest?

Read on to find out…


Bond ETFs listed on the JSE


There are currently three different ETFs listed on the JSE that give you exposure to South African government bonds.

These ETFs try to replicate the performance of their respective benchmark indices. By investing in ETFs like this, you can look forward to regular interest payments. The frequency of these depends on the fund.


The three different bond ETFs available to invest in


New Funds GOVI ETF
This ETF tracks the South African Bond Total Return Index. The fund invests in government bonds of different maturities.

It pays a monthly dividend.

New Funds ILBI ETF
This ETF tracks the Barclays/Absa South African Government Inflation-Linked Bond Index. This fund invests in government bonds of different maturities, which are inflation linked.

It pays a monthly dividend.

RMB Inflation-X ETF
This ETF tracks the Government Inflation-Linked Bond Index. This fund also invests in government bonds of different maturities, which are inflation-linked.

It pays a quarterly dividend.


How to invest in these ETFs


Just like investing in other ETFs, you can buy them through your stock broker. When buying ETFs through your stock broker, just like investing in shares, in many cases it’s not beneficial to invest less than R5,000 to R10,000 due to costs.

You also have the option of investing through a platform like www.etfsa.co.za. This route means you can invest from a lump sum R1,000 or monthly from R300.

So there you have it, how to gain exposure to government bonds through ETFs.

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How to gain exposure to government bonds through ETFs
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