This month we will see large index duration changes on the ordinary rebalancing day on June 12. The covered bonds with maturity in June 2014 will be eliminated from the bond indices and since these bonds have relatively big volumes it will impact duration significantly. The old combined index -- OMRX BOND -- will see the biggest duration extension, estimated to be a whopping 0.63 years. This is partially an effect from a bigger share of Government bonds (an increase of about 7% units) and partially an effect from extensions in covered bonds. The MORT index (only covered bonds issued by Stadshypotek) will be extended by 0.49 year. Note, however, that the rebalancing in August will result in a rebound of the share of government bonds as it will shrink to almost the same share as today.
In the ‘new’ combined index BOND-ALL that includes all issuers the duration extension is not as significant but still +0.34 years. Here the share of government bonds rises as well but only by 3% units.
We expect these changes to trigger some rebalancing flows in Swedish bonds, where we expect more demand for government bonds relative to covered bonds. However, the extension is in covered bonds and hence we expect selling of shorter dated covered bonds and buying of longer dated covered bonds.
To Read the Entire Report Please Click on the pdf File Below.
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Monthly OMRX Bond Index Update
Published 06/10/2013, 09:04 AM
Updated 05/14/2017, 06:45 AM
Monthly OMRX Bond Index Update
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