Standard & Poor’s has launched the S&P International Corporate Bond Index, an investable index of public investment grade corporate bonds issued by non-US issuers.
Denominated in US dollars, the index is designed to provide exposure to international corporate securities and will measure the performance of corporate bonds issued in G10 currencies, excluding US dollars.
The index is constructed from Eurobonds and global bonds issued in Euros and British Pounds, as well as domestic corporate bonds denominated in the Australian Dollar, Canadian Dollar, Danish Krone, Japanese Yen, New Zealand Dollar, Norwegian Krone, Swedish Krona, and Swiss Franc currencies.
JR Rieger, vice president, S&P Indices, says: “Our International Corporate Bond Index follows the launch of our World Commodity Index in offering tailored access to an ex-US asset class. Investors in the US are increasingly looking to invest in global corporate bonds as they seek additional diversification and look for ways to protect themselves against the potential threat of a weakening US dollar.”
The currency weightings in the S&P International Corporate Bond Index as of 20 April 2010 are Euro (50.0 per cent), British Pound (25.5 per cent), Japanese Yen (7.7 per cent), Canadian Dollar (7.3 per cent), Swiss Franc currencies (5.3 per cent), Australian Dollar (3.0 per cent), Swedish Krone (0.9 per cent), New Zealand Dollar (0.2 per cent) and Danish Krone (0.1 per cent).
Only fixed-rate, non-zero coupon bonds are eligible for inclusion. Covered bonds or bonds secured by mortgages are excluded from the index’s universe, as are fixed rate bonds with step-up coupons. Government, government agency, state, or any other forms of public debt or corporate debt with a government guarantee are also excluded.
The index has been designed to be sufficiently narrow to be investable and will include yield enhancement selection criteria, whereby the lowest yielding bonds will be removed at each monthly rebalancing.
The weighting of each bond is based on its outstanding market value, which is set at the monthly rebalancing. In addition, exposure to a single currency is capped at 50 per cent at each rebalancing.