Meritz Securities lists two currency-hedged ETNs tracking 30-year Japanese government bonds

Meritz Securities said Friday it is listing two currency-hedged exchange-traded notes tracking 30-year Japanese government bonds.

The two products are the Meritz Japan Government Bond 30Y ETN(H) and the Meritz 3X Leverage Japan Government Bond 30Y ETN(H). Both track a total-return index calculated by Korea Asset Pricing.

The products are the only domestic offerings — across both ETFs and ETNs — with 30-year Japanese government bonds as their underlying asset. Meritz Securities launched four ETNs tracking 10-year Japanese government bonds last year and has now expanded its lineup to the 30-year tenor.

An ETN is a derivative-linked security issued by a brokerage firm whose returns are tied to the performance of an underlying index. It is listed on an exchange and can be traded like a share.

The new products are designed to reduce exposure to yen fluctuations through currency hedging while allowing investors to take a position on movements in Japanese long-term interest rates.

The 30-year bond is more sensitive to interest rate changes than the 10-year, meaning a decline in long-term rates can produce larger price gains — but a rise in rates also leads to steeper price losses.

Currency-hedging gains and losses also affect returns. With South Korea's short-term interest rates currently higher than Japan's, the rate differential between the two countries works in favor of hedging returns. However, hedging gains and losses can vary depending on the short-term rate gap between South Korea and Japan and conditions in the foreign exchange market.

"Following last year's launch of the Japan Government Bond 10Y ETN, we have now expanded our product lineup to the 30-year tenor so that domestic investors can also gain exposure to Japan's ultra-long-term interest rates," a Meritz Securities official said. "A key feature of these products is the currency-hedging structure, which reduces the impact of yen movements and allows investors to focus more directly on the direction of Japanese long-term rates."