In a bid to cater for the increasing use of corporate bonds in investment portfolios, international investment bank JP Morgan has launched a new bond index which covers a range of different types of euro-denominated paper.
The new benchmark – called Maggie as an acronym for JP Morgan Aggregate Index Euro – is divided into three parts. One part is JP Morgan’s existing Emu Government Bond Index, a second is the JP Morgan Euro Credit Index – which is made up of euro-denominated liquid bullet eurobonds, and the third is a Jumbo Pfandbrief index. The group claims its Emu Government Bond Index is the most realistic depiction of euro-government debt, and says Greece and Austria will be added to the index next January.
Eurobond prices for Maggie are taken from the International Securities Market Association, and Reuters is providing data and prices on the jumbo pfandbriefe from its Pfandtop index.
Alan Cubbon of JP Morgan’s portfolio research team says the index is “designed to respond to the large number of government bond index users who have requested a combined government and credit index covering the euro area”.
The desire for an index which took in both sovereign and corporate debt has grown steadily due to the simultaneous expansion of the corporate bond markets and contraction of government supply, he says. To make sure the index reflects the environment in which investment professionals operate, the bank says eligible bonds are included in Maggie based on their liquidity.
The index is based on market capitalisation, and at the moment, government bonds make up about 70% of the aggregate, eurobonds comprise 20% and Pfandbriefe 10%. There are around 1,750 bonds from the three market sectors included in the index.
Data on Maggie will be published daily and made available through a number of channels, including JP Morgan’s research website MorganMarkets. Statistics on the index, such as returns and spread histories for each of the three main markets, are available back to the beginning of 1997. The index is broken down by maturity, broad rating and industry, the bank said.
As well as daily information on total returns, the provider says it will also give statistics such as yield duration and government and asset swap spreads. JP Morgan says the Maggie index is the latest member of its family of index products. These included its Government Bond Indices, European Credit Swap Index, Total Return Credit Swap Index and its Emerging Markets Bond Index.