Bloomberg announced Tuesday night that it launched two new hybrid fixed income indices, which include RMB-denominated China bonds on top of the global indices under the Bloomberg Barclays Benchmark Fixed Income Index family.
This has marked Bloomberg as the first index provider to include China bonds in its global indices offering.
The two new indices are:
Global Aggregate China Index, which combines the Global Aggregate Index with the treasury and policy bank component of the China Aggregate Index.
EM (Emerging Market) Local Currency Government China Index, which combines the EM Local Currency Government Index and treasury component of the China Aggregate Index.
"The decision to create the new hybrid China fixed income indices was due to the increasing accessibility to China's bond market for international investors and based on Bloomberg's ongoing global index review and governance process, including investor feedback from the company's Index Advisory Council meetings in November 2016," said Bloomberg in a statement.
"We are proud to introduce these China indices, which are the first of their kind. By presenting Chinese securities in the context of the world's most widely-used independent fixed income benchmarks, we can provide global investors with a new way to analyze China's bond market, and enable fund managers to proactively assess the impacts of including Chinese securities in their portfolios," said Steve Berkley, Global Head of Bloomberg's Index Business.
The Bloomberg Barclays Indices have been among the most widely-used for fixed income seeking objective, rules-based, and representative benchmarks to measure asset class risk and returns.
According to the statement, the Global Aggregate China Index currently includes 18,386 member securities with a market value of 48.45 trillion U.S. dollars, among which there are 151 China Treasury bonds and 251 bonds issued by Chinese Policy Banks. The market weight of the Chinese Yuan is 5.31 percent, ranking the fourth after the U.S. dollar, euro and the Japanese yen.
The EM Local Currency Government China Index is a market capitalization-weighted index. The index has 616 member securities including 151 China Treasury bonds. China bonds weigh 39.10 percent in the index.
In addition to the two new indices, Bloomberg has also updated the China Aggregate Index, which was first introduced to the market in 2004.
However, RMB-denominated bonds are not currently eligible for inclusion in the Global Aggregate Index, which has been a central reference point for international fixed income investors.
"Our robust governance process takes into consideration changing market developments and investor opinion, and we will continue to evaluate China's inclusion in our indices as interest in China's interbank bond market increases," said Berkley.