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Barclays makes changes to benchmark fixed income indices

Barclays is making changes to its benchmark fixed income indices after concluding its annual index review and governance process in October.

The governance process has resulted in a number of rule changes that will take effect as of 31 March 2013, as well as reaffirmations of existing rules that were reviewed and remain unchanged.

These decisions were made after evaluating the evolving fixed income landscape and incorporating the perspectives of investors who use Barclays indices as portfolio benchmarks and measures of broad fixed income market returns.

A summary of key rules changes/clarifications that will take effect as of 31 March 2013 is as follows:

Emerging markets indices

• Flagship Barclays hard currency emerging markets (EM) benchmark bond indices will be rebranded as EM Aggregate benchmark bond indices to reflect their broad country and sector coverage of the EM investment universe, which includes a growing portion of EM corporate and EM government-related debt.

• All Barclays EM benchmark bond indices (hard currency, local currency, and inflation-linked) will use a single consistent list of countries classified as EM when determining index eligibility. Criteria for inclusion in this list include both World Bank income group classifications and International Monetary Fund country designations. In addition, the list will include countries that bond investors generally classify as EM: South Korea, Israel, Taiwan, and Czech Republic.

• Nigeria and Romania will be added to the flagship Barclays EM Local Currency Government Index.

High yield indices

• Barclays high yield (HY) corporate indices, which by rule exclude issuers with an EM country of risk, will also be impacted by the new EM definition. Issuers of USD, EUR, and GBP-denominated HY debt with a country of risk that is now on the EM country list will be excluded from the Barclays US High Yield and Pan-Euro High Yield indices.

US ABS/US Aggregate Index

• Asset-backed securities (ABS) collateralised by auto lease loans, auto floorplan loans, and non-US collateral pools with cashflows denominated in USD will become eligible for inclusion in Barclays fixed and floating-rate US ABS indices, provided they meet all other index eligibility criteria.

Global Aggregate Index

• Loan participation notes (LPNs) will be added to Barclays aggregate indices including the Global Aggregate and Pan-European Aggregate.

• New local currency fixed minimum issue sizes will be set for all local currency bond markets benchmarked by Barclays. This will include the Global Aggregate and EM Local Currency Government index families. Current local currency minimums that have been pegged to USD, EUR, or JPY will remain in effect until the new local minimums are applied.

Inflation-linked indices

• Index eligibility of new markets in the World Government Inflation-Linked Bond (WGILB) Index will be reviewed (1) on a quarterly basis for developed markets that have either initiated a new inflation-linked bond program or revived an inactive inflation-linked bond program; and (2) on an annual basis for countries classified as EM. Previously, WGILB Index inclusion was only reviewed annually on 31 December. Countries must still meet existing minimum market size, credit quality, and investability criteria for this flagship index.

• Denmark and New Zealand inflation-linked government bond markets will become eligible for the WGILB and Global Inflation-Linked (Series-L) indices, once they meet the USD4bn minimum market size requirement.

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