Products July 13, 2010

PIMCO Introduces Two Sovereign Bond Benchmarks

PIMCO has unveiled the PIMCO Global Advantage Government Bond Index (GLADI Government) and European Advantage Government Bond Index, two sovereign bond benchmarks designed to capture fixed income investment opportunities. 

Reported by

According to a press release, the key differentiating feature of the new indexes is a gross domestic product (GDP)-weighting methodology that contrasts with the debt-weighted, market capitalization methodology of traditional indexes. GLADI Government covers the full set of investment-grade global government bond markets. European Advantage covers investment-grade government bonds issued by European countries, where problems in Greece and other peripheral economies underscore the need to reassess existing benchmarks.  

Instead of giving the highest weights to the countries with the most debt, which is a characteristic of market capitalization-weighted indexes, GLADI Government and European Advantage Government indexes give the highest weights to countries with the highest income based on gross domestic product (GDP).   

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PIMCO said the advantages of this approach include: 

  • Higher Allocation to Low-Debt Countries: GDP weighting favors countries with higher income and therefore better capacity to service their debt, in contrast with market capitalization-weighted indexes that can overweight highly indebted countries with the largest stocks of outstanding liabilities.  
  • Forward-Looking: GDP weighting helps structurally position portfolios in countries with stronger growth dynamics, including emerging markets, which are likely to attract increasing global capital flows in the coming years and have traditionally been underrepresented in market capitalization-weighted indexes. 
  • Counter-Cyclical Rebalancing: GDP weighting avoids the problem of market capitalization weighting that increases the weight of securities as they go up in price. In fact, it has the potential to benefit from counter-cyclical rebalancing, as bond prices tend to move inversely to GDP growth over the business cycle.  

 

Markit LLC, an unaffiliated leading financial information services company and global index provider, will administer and calculate these newest members of the family of Global Advantage indexes first launched in January 2009, according to the press release.  

More information on the index, including detailed information on construction methodology, can be found at http://www.pimcoindex.com/. 

Data & Research July 13, 2010

Americans Cite Obstacles to Savings Goals

The American Express Spending & Saving Tracker finds that consumers’ savings goal for the year has decreased since the beginning of the year, down to an average $12,000 from $14,000 in January. 
Reported by

To date, consumers report having saved 25% of their savings goal over the first six months of the year.   

According to a press release, for the 51% of consumers who say they are behind on their 2010 savings goal, the key reasons cited are: 

  • Increase in cost of non-discretionary bills such as utilities, groceries and auto (58%); 
  • Unanticipated emergencies (30%);  
  • Difficulty balancing wants versus needs (20%);  
  • Buying on impulse (20%); and 
  • Spending outside their means (17%).  

Other obstacles include lack of strategy and planning (16%), not tracking cash purchases (13%), spending on life events such as weddings and babies (12%), and pressure to keep up with others’ lifestyles (5%). More Americans say they have been focused on paying down debt (46%) than saving (29%) this year, and 57% of consumers with debt have been moving forward with a specific plan to reduce or stabilize their debt. More than a third (38%) of the general population reported decreasing their debt over the last six months, as have 52% of affluent respondents and 46% of young professionals.  

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In a mid-year financial check-up, 75% of Americans say their debt has not increased over the past six months, with more than a third (38%) reporting that their debt has actually decreased.  Thirty-four percent of respondents expect to spend less in the next six months than they have so far this year, with 50% doing so primarily to save money, 44% to maintain a budget, and 33% to reduce debt. Only 29% reported reduced income as their motivation, and 8% claimed anxiety over potential job loss.  

For access to American Express Spending & Saving Tracker results, visit www.americanexpress.com/aboutus.  

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