Intoducing the its World Broad Investment Grade Bond Index, known as WorldBIG, Salomon Smith Barney in New York says “we recognise the growing need to include spread products in a global benchmark”. The new index is part of groups family comprising the WGBI and other bond indices.
Commenting on the background reasons for the launch, SSB points to the fall in issuance of sovereign debt, particularly in the decline of higher yielding issues by some countries, notably the US, which have decreased relative to the issues from lower yielding countries such as Japan.
As global investing increases, investors are increasingly interested in high quality non-sovereign debt. “We have designed the WorldBIG Index to include those sectors of each market of most interest to global investors,” says SSB.
It is made up of government and government sponsored; collateralised and coroporate debt issues. In constructing the index, parts of the bond index family have been used, such as larger minimum sizes.
So in the US, inclusion at $500m in the new index covers just 20% of the issue market, but captures more than 80% of the market capitalisation. In the case of euro sovereigns,the limit is E1bn, for other issues E500m. For EMU countries “we look to the currency levels to to determine eligibilty”. The minimum quality is BBB/-Baa3 for sovereign debt.
All issues must have a minimum of one year to maturity and markets are monitored constantly in case the market capitalisations of issues fall below a specific benchmark.
Altogether the new index contains over 3,000 securities, with $10 trillion in value. SSB claims that this index is “truly focussed on the large issuers.that are of most interest to the traditional institutional investor base.”