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IPE special report May 2018

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Deutsche Börse unveils European bond family

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Due to investor demand, Deutsche Börse, the German stockmarket, says it is launching a European Bond Index family in late September. It is no small family, consisting of 728 indices.
In some cases, the new indices are treading on ground already covered by other index providers. But these are mostly investment houses, a spokesman for Deutsche Börse points out. “Market participants see our independence as the main advantage of having Deutsche Börse as a provider of indices,” he says.
Its complexity and comprehensive nature gives the BOX index family a further edge over competitors. “It’s a one-stop shop approach that we have here,” adds the spokesman.
The indices, called BOX for the Euro-zone and BOX for the European Union area, track the performance of federal bonds. As well as single indices for the whole of the EU area, including Switzerland but not Greece, and the Euro-zone, excluding Luxembourg, there will be indices for each of the 14 countries in the EU area and ten countries in the eurozone.
One aggregate index, encompassing all maturities, will be calculated for each of these regions and countries. As well as this, separate sub-indices will be calculated for each, based on maturity. The single country indices will have 10 sub-indices each for maturities between one and ten years, while the eurozone and EU area indices will be calculated for 13 different maturities – one to 10 years and 15, 20 and 30 years.
All the indices will be set up as both price and performance indices, as well as basket and synthetic indices. With basket indices, the maturity fluctuates depending on the bonds contained in the index, while the maturity remains consistent in a synthetic index.
Deutsche Börse says the new indices will create a single index design for the European bond market. For private investors, the exchange says, the indices offer a new basis for investments in bond funds and index warrants, while for traders they will be underlying instruments for derivatives.
The new indices contain some overlap with the Rex, Pax and Jax indices – the exchange’s existing bond indices. But there are no plans to withdraw these old benchmarks. They will simply run parallel to the BOX indices, the spokesman says.
So how will they be received by the market? “We will look to see where we are meeting the market’s needs, and where not – that will be the next step,” the spokesman says.
Rachel Fixsen

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