STOXX Expands EURO STOXX 50 Corporate Bond Index
Dr. Jan-Carl Plagge, Head of Applied Research
An expanded family of bond indices tracking maturity buckets, credit rating and industries fits in with growing demand for bonds ETFs.
2016 was a strong year for fixed-income exchange-traded funds (ETFs) in Europe, as PULSE ONLINE reported recently. Investors are getting more familiar and comfortable with the liquidity and trading benefits of investing in bond funds rather than in single securities.
STOXX introduced in 2016 a unique solution for fixed-income investors with the launch of the EURO STOXX 50® Corporate Bond Index, which tracks investment-grade, euro-denominated debt issued by constituents of the EURO STOXX 50® Index. The methodology used for the bond index’s construction is the same transparent and rules-based process employed in the flagship equities indices, making it an appropriate underlying for exchange-traded funds and derivatives.
With the aim of boosting the capabilities of listed fixed-income instruments, STOXX is now expanding this index family with sub-indices tracking maturity buckets, industry and credit rating.
The sub-indices allow investors to more efficiently and accurately capture their fine-tuned views in European credit markets, helping match desired strategies (sector allocation, duration and credit quality) that can enhance returns.
The new sub-indices include:
- EURO STOXX 50 Corporate Bond 1-3, 3-5, 5-7 and 7+ index versions
- EURO STOXX 50 Corporate Bond Financials Index
- EURO STOXX 50 Corporate Bond Ex-Financials Index
- EURO STOXX 50 Corporate Bond Ex-Financials 1-3, 3-5, 5-7 and 7+ index versions
- EURO STOXX 50 Corporate Bond AAA-A Index
The STOXX Corporate Bond Indices bridge the popular selection criteria of its Eurozone equity indices with the widely used principles of fixed-income indices from the European Federation of Financial Analysts Societies (EFFAS).
Both price and total-return versions of the indices are produced, and they are all weighted by market capitalization (outstanding amount of each bond). The benchmarks are calculated in real time globally. Because only senior bonds with amount outstanding greater than 750 million euros are considered, liquidity and tradability are addressed. For more information on calculation and methodology, please click here.
Banks stand out
Given concerns about balance-sheet strength for European lenders, the banking sector has stood out as a single-sector strategy in equity markets. The EURO STOXX® Banks Index, for example, attracts major interest in the derivatives market. It makes sense, then, to incorporate a financials sector bond benchmark that allows fixed-income investors to express similar views.
This latest step in STOXX’s ambition to roll out meaningful sub-indices of the EURO STOXX 50 Corporate Bond Index follows on the introduction of a currency-hedged version of the index as well as of multi-asset indices that combine the EURO STOXX 50 in its equities and bonds versions. All address the needs of the growing population of investors turning to listed fixed-income products.