Bloomberg is making changes to the Bloomberg Barclays fixed income indices, which provide a key source of reference data active fixed income asset managers, passive investors (ETFs) and credit investment strategists.
The changes are a result of Bloomberg’s ongoing global index review and governance process, including client feedback from the company’s Index Advisory Council meetings held in the fourth quarter of 2017.
Effective 1 June, 2018, Indonesian rupiah-denominated debt will be eligible for the Global Aggregate Index. Fifty IDR-denominated government bonds (Tickers: INDOGB and INDOIS) totalling USD151.3bn market value as of January 31, 2018 will enter the Global Aggregate and Global Treasury projected universes in early May 2018 and contribute to index returns starting 1 June, 2018.
Effective 1 May, 2018, the index eligibility rules for the Global Aggregate Index will be updated such that if the local sovereign debt of a currency is not eligible for the index, then no other securities denominated in that currency will be eligible, regardless of the securities’ issue-level ratings. As a result, 32 government-related and corporate bonds (ZAR89.0bn, USD7.5bn MV) denominated in ZAR will be removed from the Global Aggregate Index’s projected universe in early April 2018 and will not contribute to May 2018 index performance.
For additional clarification, sovereigns downgraded below investment-grade that return to investment-grade status will not automatically be eligible for the Global Aggregate Index and will need to be reassessed at the next annual benchmark governance review process.
The US Aggregate Index will continue to exclude 144A bonds without registration rights. As of 1 May, 2018, separate versions of the US Aggregate and US Credit indices will be created that include 144A credit securities (both with and without registration rights).
Ginnie Mae II (G2) custom pools will be removed from the US MBS index with a target implementation date of June 2018. G2 custom pools are not TBA-eligible, which is a requirement for inclusion in the US MBS Index. As of 31 January, 2018, 2.4 per cent of the MBS index was comprised of G2 custom pools. An exact implementation date will be provided in the near term.
Effective 1 May, 2018, 200k MBS pools will be added to the Loan Balance specified pool bucket. Currently the Loan Balance specific pool bucket includes Low Loan Balance (LLB), Mid Loan Balance (MLB), High Loan Balance (HLB), and 175K specified pool buckets. The pricing methodology of the US MBS Index is based on the non-specified pools that contribute to each cohort. Therefore, in May 2018, 200k MBS pools will no longer be included in the pricing of MBS index cohorts.
The factor date used to recognise new pool issuance and reflect actual MBS paydowns from the prior month in the US MBS Index will be moved up from the 16th business day to the 8th business day. This change will take effect starting 10 May, 2018, which is the eighth business day in May 2018. Moving the factor date earlier in the month will provide US MBS Index users earlier access to actual paydown information and the index’s projected universe for the following month.
The FX hedging methodology used in the Bloomberg Barclays Indices will be enhanced. Currently, the one-month forward quotes used to compute hedged returns are assumed to settle on the same date as spot settlement – regardless of the number of index business days in each month. The amended methodology will adjust the forward quote to take into account the number of index business days per month. This will ensure the settlement date of the currency forward is the same as the spot settlement date. This change is targeted for the fourth quarter of 2018. The exact date of implementation will be provided later.
Effective 1 May, 2018, Macau will be removed from the Emerging Market (EM) country list used to determine EM index country eligibility.
