If you’ve checked out our performance widget lately, you’ve probably noticed something strange: The Market Vectors-Indian Rupee/USD ETN (INR), a tiny exchange-traded note with barely $1 million invested, has been burning up the leaderboard.
Over the past month alone, it’s returned 97.3%:
Source: ETF.com; data as of Sept. 26, 2019
This outperformance seems to fly in the face of common sense, given that the note, which tracks the spot exchange rate between the U.S. dollar and Indian rupees, should be reflecting a much more modest rise. Since Aug. 26, the rupee has risen only 2% compared to the greenback.
INR’s soaring performance is largely a fluke born out of its structure, and it serves as a reminder that exchange-traded notes might trade like ETFs, but they don’t always behave like them.
Premiums Spike In Tiny Note
INR provides exposure to the spot-exchange rate of U.S. dollars and Indian rupees, tracking an index of rolling three-month non-deliverable currency forwards.
Since its inception in 2008, INR has tracked its index well, but it has failed to gain much in the way of investor interest. It has only $1 million in assets and barely any volume day to day. (Its median daily share volume is 5. Yes, five shares.)
However, over the past few weeks, volume in the note has picked up again—so to speak—with roughly 25,000 shares traded daily since Sept. 6. At the same time, INR developed a substantial trading premium, climbing by double digits to where it is now, over 111%:
Source: ETF.com; data as of Sept. 26, 2019
