Markit plans sovereign CDS indices

Source: Markit

Markit, a financial information services company, today announced the forthcoming launch of a family of sovereign credit default swap (CDS) indices that will track investor perceptions of the credit risk of a range of countries around the world.

Historically, the trading of sovereign CDS was limited to emerging markets, reflecting the credit risk associated with the government debt of these countries. However, an actively traded CDS market in industrialised sovereigns has now emerged as a result of the financial crisis and growing investor concerns relating to the solvency of developed economies.

The Markit iTraxx SovX family of indices has been designed to meet investor demand for a transparent and standardised tool to monitor the sovereign CDS market and gain access to the asset class on both a regional and global basis. The creation of this alternative investment tool is expected to bring more investor demand for sovereign credit.

Niall Cameron, Executive Vice President of Commodities, Indices, Equities and Risk Management at Markit, said: "The financial crisis and the effects of governments' financial guarantee schemes on the perceived credit quality of their debt have put sovereign CDS under the spotlight. We have therefore designed the Markit iTraxx SovX indices to provide investors with greater insight into the credit risk of a group of countries and an ability to gain exposure to the sovereign CDS asset class."

The Markit iTraxx SovX family of indices will initially comprise the following:

  • Markit iTraxx SovX G7 - tracking the credit risk of the most industrialised countries in the world.
  • Markit iTraxx SovX Global Liquid IG - tracking the credit risk of countries in Asia Pacific, Eastern Europe, Latin America, Middle East & Africa, North America and Western Europe.
  • Markit iTraxx SovX Western Europe - tracking the credit risk of 15 countries in Western Europe.
  • Markit iTraxx SovX CEEMEA - tracking the credit risk of 15 countries in the CEEMEA region.

The Markit iTraxx SovX indices are scheduled to launch in July 2009 and will be calculated daily on a theoretical basis. The Markit iTraxx SovX Western Europe index will be tradable as from September 2009. The other indices are expected to follow suit.

Markit will apply its objective, rules-based approach to index construction and provide important transparency by publishing daily closing prices on markit.com.

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