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UBS Investment Bank announces changes to the benchmark UBS Australia Bond Indices
UBS, the provider of Australia's benchmark bond indices, has finalised several changes to the current suite of UBS Australia Bond Indices after a significant period of stakeholder discussions. The changes will take effect from 1 February 2005.
Embargoed until 3:30pm 1 September 2004
The key changes include:
- Streamlining the suite of indices by removing some indices that are not widely used
- Expanding the UBSA Credit Index and UBSA Composite Index criteria to include issues with a rating of at least BBB- by Standard and Poor's and/or Baa3 by Moody's Investors Service and/or BBB- by Fitch Ratings. A published rating below investment grade from any of the three recognised agencies will exclude an issue from the indices
- Expanding the UBSA Credit Index and UBSA Composite Index criteria to include step-up callable and step-up soft-bullet debt with a fixed final maturity
- Partitioning the current UBSA Credit Index into a UBSA Sovereign and Supranational Index and UBSA Credit Index, which together will form a new UBSA Non-government Debt Index. The UBSA Sovereign and Supranational Index will include Supranational agencies, Sovereigns, including provincial or state government obligations and securities with an explicit government guarantee or support from sovereign, provincial or state governments
- The Australian law qualification criteria will be extended to cover the UBSA Treasury and UBSA Semi-government Indices with the effect of removing the non-Australian Law global and exchangeable securities from the UBSA Semi-government and UBSA Composite Bond Indices.
Following stakeholder feedback, the decision has been taken not to increase the current minimum issue size from A$100 million nor change the main published UBSA Composite Bond Index from 0yr+ to 1yr+ maturity (a separate 1+yr index will continue to be published).
As a consequence of these changes, which will take effect from 1 February 2005, the UBSA Composite Bond Index (measured using the issue universe as at 31 August 2004):
- will include an additional 15 issues, with a market value of A$2.8billion, as a consequence of widening the rating criteria to BBB-/Baa3/BBB-
- will include an additional 60 issues, with a market value of A$9.7billion, as a consequence of widening the inclusion criteria to include step-up callable and soft-bullet issues
- will exclude A$14billion of semi-government exchangeable and global securities as a consequence of extending the Australian law requirement across all UBSA Bond Indices
- will cover a universe of 297 issues (from 239 issues) with a market value of A$174billion (from A$177 billion)
Based on the changes, and the current issue universe, the sector weightings of the UBSA Composite Bond Index will change to:
- UBSA Treasury 29% (from 29%)
- UBSA Semi-government Index 28% (from 36%)
- UBSA Supranational and Sovereign Index 8% (new index)
- UBSA Credit Index 35% (from 35% - note included issues now in UBSA Supranational and Sovereign Index)
UBS would like to thank those stakeholders that have contributed to the finalisation of the indices changes and the strong level of support given to bringing the index into line with the development of the Australian bond market.
UBS has been the provider of the market benchmark UBS Australia Bond Indices since 1988. The UBSA Composite Bond Index is the most widely used benchmark for the performance of the Australian fixed income asset class. Following the modifications proposed above, the UBS Composite Bond Index will cover 297 securities with a market value of A$175 billion.