Fixed Income Segments

Fixed income segments can be divided into two parts: issuer types and alternative categories. 

Issuer Types

Bonds can be issued by different entities such as governments or corporates. The Issuer Type is simply the category of the entity issuing the bonds.

Trackinsight divides bonds issuers into 6 categories:

1. Government

Government bonds are issued by governments to finance public services and spending. US Treasuries also called “T-Bills”, and “Gilts” or UK Treasury Bonds are examples of government bonds.

2. Corporate

Corporate bonds are issued by companies to finance their projects and operational activities. An important consideration when investing in corporate bonds is the credit rating of the issuer. It represents the ability of the issuer to pay back its debt and interests. Issuers with a lower credit rating will pay more interest to compensate investors for the additional risk they bear.

3. Municipal

Municipal bonds are issued by municipalities or states to finance projects such as the construction of highways or airports. Most Municipal bonds are issued in the US and in Canada, some of which are either tax-exempt or have a favorable tax regimen.

4. Supranational

Supranational organizations such as development banks and central banks can issue bonds, the proceeds of which are used to have a positive global social, economic and environmental impact.

5. Government Agencies

Government agencies are quasi-governmental entities that exclusively issue mortgage-backed securities (MBS).

6. Aggregate

When a fund comprises bonds issued by different types of entities such as corporate and government bonds, Trackinsight classifies it as “Aggregate”.

Alternative categories

Trackinsight also identified alternative segments popular among investors.

1. Cash and Cash Plus

Cash and Cash Plus instruments are for investors seeking a cash exposure or alternatives to holding cash. While delivering a return, Cash and Cash Plus instruments have lower risk and price variations since they generally have a remaining maturity of less than a year. They can hold different issuer types.

2. Climate Aware

Climate-Aware ETFs refer to funds investing in (1) Green bonds issued by entities that aim to use the proceeds in order to have a beneficial impact on the environment and to fight against global warming; (2) Climate risk-adjusted government bonds offering a higher (resp. lower) exposure to countries less (resp. higher) exposed to climate change risks; and (3) Corporate bonds selected based on a carbon transition tilt including the fulfillment of constraints dictated by Paris-Aligned Benchmarks.