Barclays Capital Announces Index Rule Changes and Clarifications as Part of Its Annual Review Process

Barclays Capital, publisher of leading broad market bond benchmarks, today announced that it has completed its annual review of existing index rules as part of its formal benchmark governance procedures. This has resulted in a number of rule changes that will be in effect as of January 1, 2012 as well as reaffirmations of existing rules that were reviewed and remain unchanged. Announced changes include the addition of Israeli shekel-denominated debt to the Global Aggregate Index and the addition of Thai baht-denominated inflation-linked bonds to the Emerging Markets Government Inflation-Linked Bond Index. Clarifications were also announced regarding existing monthly index rebalancing rules and the classification/eligibility of sovereign debt in benchmarks using credit ratings.

These decisions were made after carefully evaluating the evolving fixed income landscape and incorporating the perspectives of a diverse set of global investors who use Barclays Capital indices as both portfolio benchmarks and measures of broad fixed income market returns.

The full list of rules changes that will be in effect as of January 1, 2012 is as follows:

• Israeli shekel-denominated nominal government debt will become eligible for the Global Aggregate Index. This market is currently tracked in the Barclays Capital Local Currency Emerging Markets Bond Index and will be eligible for both benchmarks.
• Thailand government inflation-linked bonds will be added to the Emerging Markets Government Inflation-Linked Bond Index (EMGILB), the second Asian market eligible for this benchmark following South Korea.
• Australia government inflation-linked bonds will be added to the Global Inflation-Linked Bond (Series-L) Indices, synchronizing the country inclusion lists of this index with the flagship World Government Inflation-Linked Bond (WGILB) Index.
• Taiwan dollar-denominated debt will be removed from the Global Aggregate and Asia-Pacific Aggregate Indices. A standalone Taiwan dollar index will continue to be published for investors interested in a government bond benchmark for this particular market.
• Bonds issued by UK water utilities issued as whole business securitizations will be reclassified from Securitized>ABS>Whole Business to Corporate >Utility>Other Utility.

In addition, Barclays Capital has reviewed and decided to make no changes to the existing rules for its monthly index rebalancing procedures as well as the classification of covered bonds in its benchmarks.

Current Barclays Capital index rules that require sovereign issuers to be classified as investment grade using the middle rating issued by Moody’s, Standard & Poor’s, and Fitch will remain in effect for Treasury/Government bond indices:

• Government bond issuers are eligible for flagship investment grade indices such as the Euro Aggregate and Euro Treasury Indices if they are rated Baa3/BBB- or higher by a minimum of two of the three credit ratings agencies.
• A single, non-investment grade rating will not affect eligibility of Treasury/sovereign debt. Only when a second agency rates a sovereign as non-investment grade will index-eligible debt from the sovereign be removed from these investment grade index families at the next monthly rebalancing.
• Maintaining these rules will enable investors who view the flagship Aggregate and Treasury/Government Indices as investment grade benchmarks to continue using their current benchmarks. Sovereigns that are no longer classified as investment grade will remain eligible for broader benchmark indices that have no explicit credit rating rule such as the Euro Treasury – All Markets Index.

Barclays Capital also announced that it will continue to classify covered bonds within the securitized sector of its index classification scheme. For credit investors who invest in covered bonds, Barclays Capital will be launching a new family of global and regional corporate bond indices that include covered bonds in addition to unsecured corporate bonds within a single benchmark. These will be available for broad corporate indices as well as narrower indices focusing on financials and banking sector debt.

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