BlackRock has rolled out three new core fixed income ETFs providing broad aggregate and high yield bond exposures while regularly hedging against inflation or interest rate risk.

BlackRock has introduced three new ETFs to help fixed income investors respond to surging inflation and aggressive monetary tightening.

The new products are timely – US inflation reached 8.6% in May, its highest level since December 1981, while the Federal Reserve recently raised the target federal funds rate by 75 basis points to 1.50-1.75% in a bid to tame runaway prices.

Two of the funds provide multi-sector investment-grade bond exposure while offering protection against inflation or interest rate risk – they are the iShares Inflation Hedged US Aggregate Bond ETF (AGIH US) and iShares Interest Rate Hedged US Aggregate Bond ETF (AGRH US).

The ETFs invest directly in the $80 billion iShares Core US Aggregate Bond ETF (AGG US) which tracks the flagship Bloomberg US Aggregate Bond Index.

The index covers government, government-related, corporate, and securitized bonds denominated in US dollars. Bonds must be fixed-rate, investment-grade, have more than one year remaining until maturity, and have a minimum par amount outstanding of at least $300m. Constituents are weighted by market value.

Each of the two new ETFs also includes a series of up to ten swap contracts in which the funds make fixed-rate payments while receiving floating-rate payments based on either a key interest or inflation reference rate. The different maturities and weights of the swap contracts are intended to hedge the portfolios’ inflation or interest rate risk at key points along the yield curve.

Each ETF comes with an expense ratio of 0.13%.

The third new listing, the iShares Inflation Hedged High Yield Bond ETF (HYGI US), targets the broad high yield corporate bond market while similarly investing in swap contracts to minimize inflation risk.

The fund gains its high yield exposure by investing in the $13.3bn iShares iBoxx $ High Yield Corporate Bond ETF (HYG US) which tracks the Markit iBoxx USD Liquid High Yield Index.

The index consists of sub-investment-grade debt issued in US dollars by corporate issuers who are domiciled in developed markets. Eligible bonds must be fixed-rate, have at least one year remaining to maturity, and have a minimum par amount outstanding of $400m. Constituents are also weighted by market value while capping the weight of any single issuer at 3%.

The ETF comes with an expense ratio of 0.52%.