Deutsche Bank said it has launched a new emerging market bond index. The index will track the performance of benchmark emerging market government eurobonds from a European perspective, the bank says.
The new index is called the Emerging Markets Liquid Eurobond Euro Index or EMLE index. Its creators claim it is the only investable, globally diversified and currency hedged index that tracked emerging market eurobonds. They say the index has better geographical diversification that is not Latin America based, than existing peers. It also has a high correlation to other emerging markets indices such as the JP Morgan EMBI+, but a low correlation to government bonds.
EMLE’s weighting methodology takes into account not just the market capitalisation of bonds but many qualitative criteria too. These criteria include credit rating, liquidity and macroeconomic factors of the issuing countries.
The index consists of 21 bonds with a target maturity of nine years and current duration of 5.16 years. The average credit rating of the paper is just under Ba2/BB.