Find out which European bond ETFs are performing the best and why they should be on your radar as an investor.
European bond exchange-traded funds (ETFs) have gained significant attention from investors seeking exposure to debt securities issued by governments of European countries. These ETFs offer diversification, liquidity, and cost-effective access to the European bond market, making them an attractive option for investors looking to balance their portfolios with fixed income assets. In this article, we will explore the 50 best European bond ETFs, as well as expert quotes and opinions on the outlook and challenges faced by these investment instruments.
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Insights and Perspectives on European Bond ETFs:
Expert opinions shed light on the various factors influencing European bond ETFs. Here are some key insights and perspectives:
Impact of the Russia-Ukraine Conflict on Energy Prices and Security:
The fundamentals of the euro area economy remain strong, but there's great uncertainty following Russia's recent invasion of Ukraine. EU countries buy a significant portion of their gas and oil from Russia, and energy prices could skyrocket if the conflict disrupts the supply. This geopolitical risk has the potential to impact European bond markets and investor sentiment. - Investopedia
Role of the ECB in Supporting the Eurozone Economy and Keeping Bond Yields Low:
The ECB has been buying up substantial amounts of government debt to keep borrowing costs low for eurozone countries and support the post-pandemic recovery. While this has provided stability to the bond market, it has also pushed down bond yields, making it challenging for investors to find attractive returns in the fixed income market. - Investopedia
Prospects of the EU Recovery and Growth in 2022 and 2023:
The EU economy is projected to grow by 4.0% in 2022 and 2.8% in 2023. Amid the Ukraine war, the European Commission has agreed to ease its financial support of the euro zone economy in 2023. However, uncertainties remain, and some investors expect that there might be room for decreasing interest rates later this year. - Investopedia
Regulatory Changes and Reforms Affecting the European Bond Market:
The ECB's policies have created challenges for investors seeking attractive yields. Moreover, the European bond market is experiencing regulatory changes that impact the overall trading landscape. Investors must be cautious and adapt to evolving market conditions. - justETF
Liquidity Issues and Trading Costs of European Bond ETFs:
While European bond ETFs offer diversification benefits, they may face liquidity issues and higher trading costs compared to larger and more liquid markets. Investors should carefully consider these factors before investing in such funds. - justETF
Read More: Accumulating ETFs vs Distributing ETFs
The Best European Bond ETFs:
According to insights from Investopedia and justETF, some of the best-performing European bond ETFs include:
Franklin Liberty International Aggregate Bond ETF (FLIA)
iShares 1–3 Year International Treasury Bond ETF (ISHG)
SPDR Bloomberg Short Term International Treasury Bond ETF (BWZ)
These ETFs have sizable allocations of European treasury bonds, with their top holdings being German bunds, bonds issued by the government of Sweden, and bonds issued by the government of Japan, respectively. However, it is important to note that they have underperformed the broad U.S. equity market over the past year, as measured by the S&P 500 index.
Read More: Best European Bank ETFs
The Top 50 Bond Indices for ETFs in 2023:
Additionally, justETF highlights the best 50 bond indices for ETFs in 2023, which offer various investment focuses such as convertible bonds, emerging markets bonds, inflation-linked bonds, and more. Some of the indices delivering positive returns over the past month and year include:
Refinitiv Qualified Global Convertible (EUR Hedged)
JP Morgan Emerging Markets Multi-Factor Enhanced Local Currency Bond
MTS Mid Price Italy 10y Target Maturity (EUR)
PIMCO Emerging Markets Advantage Local Currency Bond
Bloomberg Euro Government Inflation-Linked 10+ Year
Here are some details on the top 50 dividend-yielding ETFs based on these indices:
UBS ETF (LU) Bloomberg TIPS 10+ UCITS ETF (USD) A-dis -
Dividend Yield: 9.14%
Dividend Yield (1 year): 7.04%
Return (1 year): 0.10%
UBS ETF (LU) Bloomberg Euro Inflation Linked 10+ UCITS ETF (EUR) A-dis
Dividend Yield: 9.12%
Dividend Yield (1 year): 7.89%
Return (1 year): 7.04%
UBS ETF (LU) Bloomberg TIPS 10+ UCITS ETF (hedged to GBP) A-dis
Dividend Yield: 9.12%
Dividend Yield (1 year): 7.34%
Return (1 year): 6.77%
UBS ETF (LU) Bloomberg Euro Inflation Linked 1-10 UCITS ETF (EUR) A-dis
Dividend Yield: 7.41%
Dividend Yield (1 year): 6.73%
Return (1 year): 2.42%
SPDR Bloomberg US TIPS UCITS ETF
Dividend Yield: 7.31%
Dividend Yield (1 year): 6.06%
Return (1 year): -1.57%
Invesco AT1 Capital Bond UCITS ETF Dist
Dividend Yield: 7.28%
Dividend Yield (1 year): 5.95%
Return (1 year): -8.15%
UBS ETF (LU) Bloomberg TIPS 1-10 UCITS ETF (USD) A-dis
Dividend Yield: 7.27%
Dividend Yield (1 year): 6.08%
Return (1 year): -2.00%
Invesco AT1 Capital Bond UCITS ETF EUR Hedged Dist
Dividend Yield: 7.03%
Dividend Yield (1 year): 6.09%
Return (1 year): -5.97%
Invesco AT1 Capital Bond UCITS ETF GBP Hedged Dist
Dividend Yield: 6.89%
Dividend Yield (1 year): 5.92%
Return (1 year): -2.07%
iShares Broad USD High Yield Corporate Bond UCITS ETF USD (Dist)
Dividend Yield: 6.76%
Dividend Yield (1 year): 6.12%
Return (1 year): 2.82%
SPDR Bloomberg SASB U.S. High Yield Corporate ESG UCITS ETF Dist USD
Dividend Yield: 6.61%
Dividend Yield (1 year): 6.05%
Return (1 year): 2.26%
Invesco US High Yield Fallen Angels UCITS ETF Dist
Dividend Yield: 6.59%
Dividend Yield (1 year): 5.85%
Return (1 year): 0.46%
UBS ETF (LU) Bloomberg USD Emerging Markets Sovereign UCITS ETF (USD) A-dis
Dividend Yield: 6.33%
Dividend Yield (1 year): 6.00%
Return (1 year): 2.20%
Xtrackers USD High Yield Corporate Bond UCITS ETF 1D
Dividend Yield: 6.33%
Dividend Yield (1 year): 5.72%
Return (1 year): 2.57%
WisdomTree AT1 CoCo Bond UCITS ETF USD Hedged
Dividend Yield: 6.26%
Dividend Yield (1 year): 5.27%
Return (1 year): -6.54%
WisdomTree AT1 CoCo Bond UCITS ETF
Dividend Yield: 6.16%
Dividend Yield (1 year): 5.29%
Return (1 year): -5.51%
iShares USD High Yield Corporate Bond ESG UCITS ETF USD (Dist)
Dividend Yield: 6.13%
Dividend Yield (1 year): 5.51%
Return (1 year): 2.22%
UBS ETF (LU) Bloomberg USD Emerging Markets Sovereign UCITS ETF (hedged to GBP) A-dis
Dividend Yield: 6.13%
Dividend Yield (1 year): 6.14%
Return (1 year): 9.50%
WisdomTree AT1 CoCo Bond UCITS ETF EUR Hedged
Dividend Yield: 6.10%
Dividend Yield (1 year): 5.41%
Return (1 year): -4.85%
Xtrackers iBoxx EUR High Yield Bond 1-3 Swap UCITS ETF 1D
Dividend Yield: 5.98%
Dividend Yield (1 year): 5.90%
Return (1 year): 3.87%
Invesco USD High Yield Corporate Bond ESG UCITS ETF Dist
Dividend Yield: 5.92%
Dividend Yield (1 year): 5.28%
Return (1 year): 2.00%
WisdomTree AT1 CoCo Bond UCITS ETF GBP Hedged
Dividend Yield: 5.91%
Dividend Yield (1 year): 5.24%
Return (1 year): -0.17%
Xtrackers USD Emerging Markets Bond UCITS ETF 2D
Dividend Yield: 5.76%
Dividend Yield (1 year): 5.39%
Return (1 year): 1.77%
iShares J.P. Morgan USD Emerging Markets Bond UCITS ETF (Dist)
Dividend Yield: 5.73%
Dividend Yield (1 year): 5.34%
Return (1 year): 1.86%
Invesco USD High Yield Corporate Bond ESG UCITS ETF GBP Hedged Dist
Dividend Yield: 5.59%
Dividend Yield (1 year): 5.24%
Return (1 year): 8.64%
Vanguard USD Emerging Markets Government Bond UCITS ETF Distributing
Dividend Yield: 5.51%
Dividend Yield (1 year): 5.09%
Return (1 year): 1.11%
iShares J.P. Morgan USD EM Bond CHF Hedged UCITS ETF (Dist)
Dividend Yield: 5.48%
Dividend Yield (1 year): 5.38%
Return (1 year): 4.73%
iShares USD High Yield Corporate Bond UCITS ETF EUR Hedged (Dist)
Dividend Yield: 5.18%
Dividend Yield (1 year): 4.97%
Return (1 year): 3.21%
iShares USD Short Duration High Yield Corporate Bond UCITS ETF
Dividend Yield: 5.16%
Dividend Yield (1 year): 4.74%
Return (1 year): 0.43%
iShares J.P. Morgan EM Local Government Bond UCITS ETF
Dividend Yield: 5.14%
Dividend Yield (1 year): 5.16%
Return (1 year): 5.97%
JPMorgan USD Emerging Markets Sovereign Bond UCITS ETF - USD (Dist)
Dividend Yield: 5.08%
Dividend Yield (1 year): 4.76%
Return (1 year): 0.68%
PIMCO Emerging Markets Advantage Local Bond Index UCITS ETF Dist
Dividend Yield: 4.81%
Dividend Yield (1 year): 5.05%
Return (1 year): 7.68%
UBS ETF (LU) J.P. Morgan USD EM Diversified Bond 1-5 UCITS ETF (USD) A-dis
Dividend Yield: 4.90%
Dividend Yield (1 year): 4.55%
Return (1 year): 0.40%
iShares Fallen Angels High Yield Corp Bond UCITS ETF EUR Hedged (Dist)
Dividend Yield: 4.83%
Dividend Yield (1 year): 4.71%
Return (1 year): 3.72%
SPDR Bloomberg 10+ Year US Corporate Bond UCITS ETF
Dividend Yield: 4.82%
Dividend Yield (1 year): 4.12%
Return (1 year): 1.41%
PIMCO Emerging Markets Advantage Local Bond Index UCITS ETF EUR Hedged Dist
Dividend Yield: 5.00%
Dividend Yield (1 year): 4.93%
Return (1 year): 3.66%
iShares Global High Yield Corporate Bond UCITS ETF
Dividend Yield: 4.44%
Dividend Yield (1 year): 4.26%
Return (1 year): 3.29%
iShares USD Corporate Bond UCITS ETF (Dist)
Dividend Yield: 4.43%
Dividend Yield (1 year): 3.87%
Return (1 year): 0.50%
UBS ETF (LU) Bloomberg USD Emerging Markets Sovereign UCITS ETF (hedged to EUR) A-dis
Dividend Yield: 4.76%
Dividend Yield (1 year): 4.70%
Return (1 year): 2.88%
UBS ETF (LU) Bloomberg USD Emerging Markets Sovereign UCITS ETF (hedged to GBP) A-dis
Dividend Yield: 4.71%
Dividend Yield (1 year): 4.63%
Return (1 year): 7.23%
iShares J.P. Morgan USD EM Corporate Bond UCITS ETF (Dist)
Dividend Yield: 4.68%
Dividend Yield (1 year): 4.33%
Return (1 year): 0.23%
iShares EUR High Yield Corporate Bond UCITS ETF EUR (Dist)
Dividend Yield: 4.53%
Dividend Yield (1 year): 4.59%
Return (1 year): 5.63%
Xtrackers ESG USD Emerging Markets Bond Quality Weighted UCITS ETF 1D
Dividend Yield: 4.52%
Dividend Yield (1 year): 4.07%
Return (1 year): 0.69%
iShares Global High Yield Corporate Bond UCITS ETF EUR Hedged (Dist)
Dividend Yield: 4.44%
Dividend Yield (1 year): 4.71%
Return (1 year): 3.72%
SPDR Bloomberg 10+ Year US Corporate Bond UCITS ETF
Dividend Yield: 4.82%
Dividend Yield (1 year): 4.12%
Return (1 year): 1.41%
iShares Fallen Angels High Yield Corporate Bond UCITS ETF
Dividend Yield: 4.91%
Dividend Yield (1 year): 4.57%
Return (1 year): 2.15%
PIMCO US Short-Term High Yield Corporate Bond Index UCITS ETF Dist
Dividend Yield: 5.37%
Dividend Yield (1 year): 4.97%
Return (1 year): 1.36%
iShares USD Corporate Bond UCITS ETF (Dist)
Dividend Yield: 4.43%
Dividend Yield (1 year): 3.87%
Return (1 year): 0.50%
iShares USD Treasury Bond UCITS ETF
Dividend Yield: 2.12%
Dividend Yield (1 year): 1.90%
Return (1 year): -5.39%
iShares USD Government Bond 1-3yr UCITS ETF
Dividend Yield: 0.46%
Dividend Yield (1 year): 0.43%
Return (1 year): -0.85%
Please note that dividend yield and returns can fluctuate over time, so it's essential to conduct thorough research and consider your investment goals and risk tolerance before investing in any ETFs. Additionally, always consult with a financial advisor for personalized investment advice.
Read More: What are UCITS ETFs?
Bottom Line:
European bond ETFs continue to attract investor interest, offering exposure to the debt securities of European countries with the potential for diversification and cost-effectiveness. While geopolitical risks, regulatory changes, and liquidity issues pose challenges, expert opinions suggest that European bond ETFs can still play a vital role in portfolios, especially as central banks navigate the post-pandemic economic landscape. Investors should remain informed and cautious, considering both the opportunities and challenges in the European bond market.