S&P Unveils International Bond Benchmark

According to a news release, the S&P/Citigroup International Treasury Bond Index Series is a benchmark representing developed market treasury bonds excluding the United States. The indexes include only countries that are classified as being developed markets by the Bank of International Settlements, an announcement said.

The top three sovereign issuers represented in the index series, as of September 30, are Japan (24.95%), Germany (9.28%), and Italy (8.74%). The indexes do not have a set number of constituents, but are based on how many issues are eligible at each rebalancing. No single country can have a weight of greater than 24.95%.

The new series consists of two indexes : the S&P/Citigroup International Treasury Bond Index Ex-US, which includes bonds with a maturity of greater than one year; and the S&P/Citigroup International Treasury Bond Index Ex-US 1-3 Year, which includes bonds with a maturity of between one and three years.

The indexes are rebalanced at the end of each month. On a back-tested basis, the yields of the indexes have generally been between 2% and 4% since April 2001, according to S&P.

“Treasury bonds issued by sovereign nations excluding the United States are an asset class that is often overlooked by investors,” said James Rieger, vice president, Standard & Poor’s Index Services, in the announcement. “They have returns with low correlations with U.S. stocks and bonds as well as international stocks. The new indices are designed to provide investors with more transparency about the performance of this asset class. Risk factors include default risk, liquidity risk, interest rate risk and currency risk.”