Barclays Makes Tweaks, Plans New Bond Indexes

September 27, 2010

Barclays Capital, the investment banking arm of U.K.-based Barclays Plc, plans to launch a new line of aggregate/inflation composite indexes next year that will include inflation-linked debt to accommodate changes in the world of bond investing.

Barclays Capital, the investment banking arm of U.K.-based Barclays Plc, plans to launch a new line of aggregate/inflation composite indexes next year that will include inflation-linked debt to accommodate changes in the world of bond investing.

Barclays, whose bond indexes are behind most of iShares’ and State Street Global Advisor’s fixed-income ETFs, will also continue to exclude inflation-linked bonds from its existing lineup of benchmarks, the company said in a press release.

The investment bank said the decisions were made after evaluation of the evolving fixed-income landscape that took into account perspectives of various global investors who use Barclays’ indexes as either portfolio benchmarks or to measure broad fixed-income market returns.

Investors who prefer a broader benchmark that includes inflation-linked government debt will have to wait until January 2011, when Barclays will launch its new index family. Barclays plans to disclose further information about the new indexes in the coming months.

It also said that simultaneously maintaining current rules will enable investors who view inflation-linked debt as a distinct fixed-income asset class to continue using their current benchmarks.

In addition, Barclays announced the following changes, effective Jan. 1:

 


  • U.S.
    commercial mortgage-backed securities classified as an A1A tranche will be removed from the U.S. Commercial Mortgage Backed Securities Index and the U.S. Aggregate Bond Index. In a press release, Barclays cited the illiquidity of these securities as the reason for the change.

 

  • Moody’s, Standard & Poor’s and Fitch’s middle rating will be used for credit quality classification for all Barclays benchmark indexes. According to Barclays, this change will affect only Series-B inflation-linked and government bond indexes, which had previously used lower Moody’s and Standard & Poor’s ratings.

 

  • U.S. dollar-denominated covered bonds will be eligible for the U.S. Aggregate Bond Index. Barclays noted that no covered bonds currently meet this bond index’s inclusion rules but that covered bonds will be eligible as long as they are publicly registered and meet the index’s other listing criteria.

 

  • High-yield commercial mortgage-backed securities will be removed from the Barclays Capital Global High-Yield Index. Barclays cited the small issue size, pricing difficulties and overall illiquidity of the market for these notes as the reason for the change. These securities have already been removed from the U.S. Universal Index for similar reasons.
 

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