Horizons ETFs Management (Canada) Inc. Tuesday to announce the launch of the Horizons US 7-10 Year Treasury Bond ETF (HTB), which will provide investors with low-cost and tax-efficient exposure to the U.S. mid-term treasuries market.

Units of the ETF will begin trading Wednesday on the Toronto Stock Exchange (TSX) in Canadian dollars (TSX:HTB) and in U.S. dollars (TSX:HTB.U).

HTB seeks to replicate, to the extent possible, the performance of the Solactive US 7-10 Year Treasury Bond Index (Total Return), net of expenses. This index is rules-based and designed to measure the performance of the US 7-10 Year Treasury Bond market.

HTB is the second fixed income exchange traded fund (ETF) in Canada to use Horizons’ total return swap (TRS) structure following last year’s launch of the Horizons Cdn Select Universe Bond ETF (HBB).

The TRS structure reduces the risk of tracking error for ETFs, which can arise when seeking to physically replicate an index, Horizons ETFs says. Additionally, Horizons’ suite of TRS-based ETFs have never made a distribution, validating their tax-efficiency for unitholders.

“In a low interest rate environment, such as this one, taxes charged on interest income from bonds will erode returns,” says Howard Atkinson, president of Horizons ETFs Management (Canada) Inc. “However, by using a TRS structure, as HTB and HBB do, investors in non-registered accounts can ensure they are receiving the total compounded return of the underlying bond index, without the usual tax consequences that can occur from investing in this asset class directly.”

The Solactive US 7-10 Year Treasury Bond Index was developed and is calculated by Solactive AG, one of the world’s fastest growing index providers, which, as at March 31, has approximately US$25 billion amongst 170 ETFs benchmarked to its indices.