State Street Global Advisors has fired a couple of shots in the ongoing fee war among exchange-traded fund providers with today's news that it trimmed the cost of two bond ETFs.
The net expense ratio of the SPDR Portfolio Aggregate Bond ETF (SPAB) was reduced by one basis point, to 0.03%, while the fee on the SPDR Portfolio Corporate Bond ETF (SPBO) was cut in half, from 0.06% to 0.03%.
The SPDR Portfolio Aggregate Bond ETF is intended as a core bond allocation in investor portfolios. Rival funds include the Vanguard Total Bond Market Index ETF (BND), which charges 0.035%, and the iShares Core US Aggregate Bond ETF (AGG) and Schwab US Aggregate Bond ETF (SCHZ), which both charge 0.04%.
All three of these funds have more assets than the SPDR product’s $6.1 billion. The iShares fund is tops in the aggregate/total bond category with assets of $88.6 billion, followed by the Vanguard fund at $78.4 billion, according to ETF Database.
For investors, the more important consideration is that the SPDR Portfolio Aggregate Bond ETF sports a 30-day SEC yield of 1.41%, which is five to nine basis points greater than the other three funds.
Corporate Bonds
The SPDR Portfolio Corporate Bond ETF and its investment-grade peers offer higher yields than aggregate bond funds, as well as slightly longer durations and higher credit risk. State Street touts its product as a cheaper alternative to rivals, including the iShares Broad USD Investment Grade Corporate Bond ETF (USIG), which charges 0.04%; the Vanguard Total Corporate Bond ETF (VTC), which has a fee of 0.05; and especially the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) with its expense ratio of 0.14%.
All three of these funds have significantly more assets than the $347.6 million SPDR product, and they offer equal or greater yields than the SPDR fund’s 30-day SEC yield of 2.07%.
But with fixed-income yields being as puny as they are, State Street hopes that lowering fees on these two ETFs will tickle the wallets of bond fund investors.