Standard & Poor’s is teaming up with CIBC World Markets, RBC Capital Markets and TSX Inc. to create Canada’s first independent fixed-income index.
The new S&P/TSX Canadian Bond Index, which Standard & Poor’s intends to calculate and distribute in collaboration with CIBC World Markets, RBC Capital Markets, and the TSX, is scheduled to be launched in the first quarter of2005.
The index will be designed to represent the returns of investment-grade bonds issued by Canadian companies and by issuers in the government sector.
“The S&P/TSX Canadian Bond Index further exemplifies our commitment to the Canadian market,” said Steve Rive, vp of Canadian Index Services at Standard & Poor’s, in a release.
CIBC WM and RBC CM will initially be the price providers for index-valuation purposes. As well, CIBC WM and RBC CM will be discontinuing their respective fixed income indices after a transition period.
TSX will be a data distribution vehicle for the new index.
Once launched, the index will serve as a benchmark for fixed-income portfolios, and clear the way for the development of bond index-linked investment vehicles.
According to S&P, the key features that will distinguish the index from existing fixed income indices in Canada are:
- independence from market participants;
- the use a blended price for each bond based on individual prices provided by multiple contributors, reflecting a broader and more objective perspective on the market than an index based on a single dealer’s prices; and
- an Advisory Panel comprised of members of the investment community, including institutional investors, consultants, and actuaries will be struck to ensure the index serves market needs.
“RBC Capital Markets believes the new index methodology, multiple pricing providers, as well as the strong support of Standard & Poor’s, CIBC World Markets, and TSX will ensure that the S&P/TSX Canadian Bond Index becomes the preeminent fixed income index in Canada,” said Chuck Powis, managing director at RBC CM, in a release.