MSCI Offers Global Fixed Income Indexes

January 01, 1999

In mid-November, 1998, Morgan Stanley Capital released two global fixed income benchmarks, the MSCI Euro Credit Index and the MSCI Sovereign Debt Indices.

The Euro Credit Index, intended as a benchmark for the sovereign and credit bond markets, will include investment grade fixed rate debt denominated in the Euro and EMU currencies, but will not include issues and debt intended for retail investors.

'EMU will create a large, unified and liquid bond market that will constitute 25% of the global debt markets, and benchmark indices will be required both for performance measurement and for investment analysis,' said MSCI president Henry Fernandez in a press release.

The index is similar to offerings by other companies such as Lehman Brothers, Salomon Brothers and Merrill Lynch, according to Robert Fuhrman, a Principal in the Fixed Income department at MSDW. However, Lehman's and Merrill's credit indexes are very broad with 4,000 to 6,000 issues, and as a result, they tend to do a lot of matrix pricing, he said. 'We confine ourselves to liquid issues that are likely to be traded by institutional firms.' He added that Salomon had a similar approach. 'It's a very crowded marketplace with a lot of competition,' Fuhrman said.

The MSCI Sovereign Debt Indices is entering a field that is almost as crowded and where J. P. Morgan and Salomon Brothers tend to be the largest players.

The new group of indexes is intended to complement the MSCI global equity indexes. The series will include government bond indexes and total return swap-based indexes for various developed and emerging markets, as well as regional sovereign debt indexes to match the availability of regional MSCI equity indexes.

'We do expect to build investment products around them,' Fuhrman said. He added that the indexes also served research functions.

 

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