CSI to launch China Development Bank bond index

Apr 25th, 2017 | By | Category: Fixed Income

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China Securities Index (CSI) will launch the CSI 5-Year Target Duration CDB Bond Index on 22 May 2017. Designed to provide an investable benchmark for fixed income investors, the index will constitute China Development Bank (CDB) bonds with a term to maturity of 1-10 years, and can serve as the underlying for future investment products including ETFs.

The index currently has 49 constituents, the weights of which are optimised to give an overall index duration of 5 years.

CDB bonds are eligible if they are listed in the inter-bank market in Renminbi with over ¥20 billion ($2.9bn) outstanding. The bonds may be either fixed rate or bullet bonds. Constituent weightings are optimised to give a total index duration of five years with rebalancing occurring on a monthly schedule.

CBD is one of three state-run banks in China and is primarily responsible for raising funding for large infrastructure projects. It was established in 1994 and bonds issued by the CDB are treated as risk-free assets by the People’s Bank of China.

Investors looking to gain immediate exposure to Chinese government bonds through an ETF could try the db X-trackers Harvest CSI China Sovereign Bond UCITS ETF (LON: CGB) which invests in Chinese government bonds listed in Renminbi with a maturity of 4-7 years. The ETF has assets under management of £20 million and a total expense ratio of 0.55%.

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