Independent index provider Solactive launched the Solactive Diversified USD Covered Bond Index in January. The benchmark is made up of covered bonds and is intended to provide exposure to a diversified pool of U.S.-dollar-denominated international bonds that offer high credit quality and attractive yield potential.
The index universe is composed of all AAA-rated and 144A-eligible USD-denominated covered bonds that have a fixed coupon. To be included in the index, bonds should meet several liquidity criteria, including a remaining time to maturity of 18 months or more, trading size of $250,000 or below and an amount outstanding of $1 billion or above.
The index had 54 constituents. The country breakdown was as follows: 43 percent Canada, 18 percent Australia, 13 percent Norway, 9 percent Sweden, 6 percent U.K., and 11 percent for Switzerland, France, Netherlands and Germany.
The index, which is rebalanced quarterly, is weighted by market value. Caps are applied to ensure that no single issuer exceeds 25 percent of the index and that issuers with a weight of 5 percent or more do not make up more than 50 percent of the index.
The index was adopted by the ProShares USD Covered Bond ETF (COBO | C-26) as its benchmark as of Jan. 15.