The global business and financial information provider Bloomberg launched a new index on Thursday to track the liquid, tradable portion of the RMB-denominated credit bond market.
The new index is called Bloomberg Barclays Liquid China Credit (LCC) Index, which uses a unique methodology that incorporates trading volumes of the China Foreign Exchange Trade System, among other criteria.
Specifically, bonds are included if they have traded on at least 10 percent of the business days over the past three months and have at least 250 million yuan in aggregate trading volume over that period, according to a statement from the company.
The new index was launched during the final month of a 20-month phase-in of China Government and Policy Bank securities into the flagship Global Aggregate Index, which began in April 2019.
In early November, Bloomberg will be the first global index provider to complete China's inclusion into its flagship index, the Bloomberg Barclays Global Aggregate Index, marking a milestone in the investability of this important bond market, Bloomberg said.
Chinese securities now represent about 6 percent of the index, and local currency Chinese bonds will be the fourth largest currency component after the dollar, euro and yen. Liquid China Credit bonds are not currently eligible for inclusion in the Bloomberg Barclays Global Aggregate Index.
Using data as of Oct 30, 2020, the LCC Index contains 125 securities across 48 issuers with official BCLASS classifications of both government-related and corporate. The average yield was 3.4 percent and duration was 1.9.
"With government and policy bank securities now fully phased into the Global Aggregate Index, the LCC Index is an important step towards establishing broader transparency and accessibility into China's credit markets," said Steve Berkley, CEO of Bloomberg Index Services Ltd.
"We expect that this new index will help market participants better understand the attributes of China's credit market. Investors and asset managers can use it numerous ways, including in product launches, derivative contracts and traditional benchmarking," Berkley said.
Hu Jian, senior managing director and chief investment officer for Fixed Income, E Fund Management Co Ltd, said that, "The launch of the LCC Index is a major step towards introducing China's onshore credit market to global investors, with enhanced access to critical information such as global rating, liquidity and diversification."
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