Following the European iBoxx Annual Index Review 2018, IHS Markit is pleased to announce the following changes and clarifications of its index rules. All amendments have been discussed with both European iBoxx Advisory Committees prior to IHS Markit’s decision on the implementation. 1. Eligibility of Insurance Tier 1 Debt
Insurance Restricted Tier 1 debt (RT1) will become eligible for the iBoxx Contingent Convertible indices, provided they feature an observable trigger. The iBoxx Contingent Convertible (CoCo) indices cover bonds issued in EUR, GBP and USD. RT1 bonds will be included for these 3 currencies. As illustrated in below table, the RT1 bonds will adopt the new classification “RT1” within the iBoxx “Seniority Level 2” classification field. The existing liquid CoCo indices are specific to the seniority levels “AT1” and “T2”. Therefore, the RT1 bonds will not enter the existing liquid indices due to the separate classification:
| Market Sector || Seniority Level 1 || Seniority Level 2 |
| Banks || SUB || AT1 |
| Insurance || SUB || RT1 |
This inclusion will be effective as of the 30 September 2018 rebalance. The entering RT1 bonds will be shown in the index previews during the month of September. 2. Country Classification between Developed and Emerging Markets
IHS Markit discussed the country classification review with the iBoxx Committees. The three countries under review were Slovenia, Israel and Kuwait. These countries are currently classified as emerging markets that are identified on the threshold (transition period) of eligibility to developed markets based on the IHS Markit Economic Development Classification Methodology.
3. Treatment of Bond Rating Upgrades on T-2
- Kuwait will remain an emerging market due to its resource-focused economy.
- Slovenia will remain an emerging market. IHS Markit will consider a change next year.
- Israel will be further evaluated for upgrade to Developed Markets pending its 2018 country classification data and wider global consultation. A final decision will be communicated thereafter.
Bonds that are upgraded from the iBoxx High Yield universe and become eligible for the iBoxx Investment Grade indices two business days prior to rebalancing do not enter the investment grade indices under the existing rules. This caused a situation where bonds would leave crossover indices and re-enter only the following month.
To address this, constituent bonds of iBoxx High Yield that are upgraded to investment grade on T-2 will enter the iBoxx Investment Grade indices on the same day, provided they are eligible.
This rule change will be effective as of the 30 September 2018 rebalance.
IHS Markit will further assess the iBoxx rebalancing index cut-off methodology and plans to align the cut-off for insertions and exclusions to the same date. This will simplify the movement of bonds between indices. The details will be communicated in a separate announcement nearer to the date when the decision on implementation will be made. 4. Clarification on Bond Eligibility during Tender
Updates on bonds under tender or exchange offers will only be actioned once the results are publicly available. In the case of an exchange offer, the old notes will remain in the index until the new notes are available. In the case of like-for-like exchange offers, available new notes with a missing rating will be assigned the rating of the old notes. For exchange offers with different terms the rating will not be carried across to the new notes and the old notes remain in the index until all details of the new notes including their rating are available. 5. Daily Calculations of iBoxx Indices
Bonds that are part of global indices that will be launched in the future will be calculated and published as part of these indices every day, Monday to Friday irrespective of the existing holiday calendar. Existing single currency indices such as EUR and GBP will keep adhering to their holiday calendar and the data will only be published on trading days and rebalancing days as in the past. This update has no impact on existing iBoxx indices. 6. Consistent Definitions of Global Regions
IHS Markit global regions definitions will remain as they are following the consultation with index committees. 7. Treatment of Called Bonds
The treatment of called bonds will be updated. Currently, called bonds are removed from the index at the earliest rebalancing following the announcement of their call at the then current price. Going forward called bonds will remain in the iBoxx indices until the call date and leave the index at the call price.
The change will be effective as of the 30 September 2018 rebalance.
For more information please contact us at firstname.lastname@example.org.