Markit introduces iBoxx US Non-Agency RMBS indices

Apr 11th, 2013 | By | Category: ETF and Index News

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Markit, a leading provider of fixed income indices, has announced the launch of the Markit iBoxx US Non-Agency RMBS Indices, a family of cash bond indices based on a portfolio of US non-agency Residential Mortgage-Backed Securities (RMBS).

Markit introduces iBoxx US Non-Agency RMBS indices

Armins Rusis, Managing Director and Global Co-Head of Information at Markit.

The new indices provide market participants with a means to assess the returns of the US non-agency RMBS market and are well suited for use a fund benchmarks and underlyings for index-linked products such as exchange-traded funds (ETFs).

The index family consists of 27 sub-indices referencing approximately 350 senior bonds from a portfolio of 22,000 RMBS issued between 2005 and 2007. These sub-indices are divided into four categories: Prime, Sub-Prime, Alt-A and Option ARM.  They are further broken down by vintage to allow for granular performance analysis.

Armins Rusis, Managing Director and Global Co-Head of Information at Markit, said: “We are delighted to further expand our fixed income index coverage.  Our aim is to provide a comprehensive family of indices covering all securitised products, which will be ideal for performance attribution and the structuring of financial products.”

Index composition is rules-based, with selection criteria including deal size, pricing date and the type/quality of the mortgages referenced in each deal. These indices use the Markit iBoxx index calculation methodology.  Pricing is based on Markit’s bond pricing service, which uses multiple observable price sources for pricing accuracy and provides detailed information on the inputs used in the evaluation process.

Markit is one of the foremost providers of fixed income-related indices to ETFs, along with Barclays, and to a lesser extent, MTS, FTSE and PC-Bond (DEX). Markit is also the index provider to the world’s largest bond ETF, the NYSE Arca-listed iShares Investment Grade Corporate Bond ETF (LQD), which is linked to the Markit iBoxx USD Liquid Investment Grade Index and has some $23.7 billion in assets.

As yet, there aren’t any ETFs dedicated to the US non-agency RMBS market. However, investors are able to get exposure to covered bonds, which in many cases are underpinned by pools of residential mortgages and can have similar return profiles to RMBS. Examples of funds in this space include the ProShares USD Covered Bond ETF (COBO), linked to the BNP Paribas Diversified USD Covered Bond Index, and the db X-trackers iBoxx EUR Liquid Covered UCITS ETF (XLIQ), linked to the Markit iBoxx EUR Liquid Covered Index.

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