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Barclays has introduced two new types of indices, the Barclays Mirror Futures Indices and the Barclays Duration Hedged Indices, that use liquid Treasury futures contracts to replicate the interest rate duration exposure of a Barclays fixed income index.
The indices have been designed for investors seeking to adjust the duration of their fixed income benchmarks while preserving the broad coverage and diversification of their existing fixed income investment set.
The indices are expected to be used by both active and passive investors for a variety of portfolio applications including index replication, interest rate hedging, and as benchmarks for investors who want duration exposure that differs from their existing benchmark.
Mirror Futures Indices are indices whose return reflects a funded set of Treasury futures contracts, weighted to match closely the beginning-of-the-month option-adjusted duration (OAD) profile of an underlying standard Barclays bond index such as the US Aggregate or Global Aggregate.
Duration Hedged Indices are funded indices that reflect the return of a Barclays fixed income index with its interest rate duration hedged (fully or partially) using its associated Mirror Futures Index.
Commenting on the launch, Brian Upbin, Head of Benchmark Index Research at Barclays, said: “By continuing to invest in new index technology and developing new and innovative index products, Barclays is able to offer debt investors a full suite of index and portfolio risk solutions truly tailored to their strategic market perspective.”
Ajay Rajadhyaksha, Co-Head of FICC Research at Barclays, added: “Movements in interest rates represent the largest driver of returns for fixed income investments. Investors seeking to adjust the duration of their fixed income portfolios in expectation of rising rates will now have an independent and rules-based benchmark alternative that scales the duration exposure to a desired level, while preserving the broad coverage and diversification of their existing fixed income investment set.”
The launch of the indices coincides with the 40th anniversary of the Barclays index platform. Today the business comprises a broad offering of thousands of standard and bespoke indices spanning developed and emerging debt markets, investment grade and high yield bonds, fixed- and floating-rate debt, nominal and inflation-linked securities and the taxable and tax-exempt markets.
In more recent years, Barclays has introduced a range of alternatively weighted indices – often dubbed ‘smart beta’ – including fiscal strength and GDP-weighted indices, a new family of LDI benchmarks, and environmental, social, and governance (ESG) themed fixed income indices.
The firm is recognised as the top-ranked bond market index provider in the US and Europe, and is the largest provider of fixed income indices to the exchange-traded funds industry.