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IPE special report May 2018

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New sterling index

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Barclays Capital has launched a new sterling bond index, which includes more than 650 bond issues. It says the new index, the Barclays Sterling Bond Index is more flexible than the existing benchmark, allowing investors to tailor different components to create their own benchmarks.
Also, Barclays Capital announced a new push into index products with the launch of its Index Product Group. “Index Product is the cornerstone of fixed income investment in the US market and will rapidly achieve similar status here in Europe,” says Robert E Diamond Jnr, chief executive of Barclays Capital.
The rapid growth of the corporate bond market in Europe meant that fixed income investors needed a fuller range of indices to measure their performance, he said, in much the same way as equity investors. “Our Index Product Group aims to be a leader and a pace-setter in this market, providing our investors’ clients with a family of transparent, flexible, user friendly indices,” he says.
William Lloyd, former head of strategy for Barclays Capital in New York, has been appointed head of the new product group. Lloyd saysthe diminishing supply of UK government bonds was being counterbalanced by the huge growth in debt issued by companies.
“As in the Euro-zone, sterling in-vestors now have to recognise the trade-off between yields and credit quality to a much greater extent and in a more closely defined manner than before,” he says. The new index was a valuable tool in helping them to measure their success in this respect, he adds.
In 1992, Government bonds accounted for 70% of new sterling issues, but by the end of the decade, that proportion had shrunk to less than a quarter, according to Barclays Capital.
The Sterling Bond Index is based on prices generated by Barclays Capital traders, and offers historical data going back to 1991. It is rule-driven, meaning that if a bond meets the specified criteria it will be included in the index.
It is calculated daily, and information is available on the Barclays Capital web site, www.barcap.com, and Bloomberg. Custom indices can most easily be created on the Barclays Capital web site, it said.
The index is divided into three categories – gilts, credit and structured product – and each category can be divided based on maturity, rating, industry or any combination of the three.
Return and attribute data is available for each sub-sector.
Rachel Fixsen

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