China Securities Index Co., Ltd. (CSI) has recently announced that the official launch of the CSI Aggregate Bond Index will be released on December 17, to synchronize with the price fluctuation on the inter-bank bond market and on the bond market of the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE). Meanwhile, the CSI Aggregate Bond Index will serve the investors as an analysis tool and a performance appraisal benchmark.
According to the published index scheme, constituents of the CSI Aggregate Bond Index are composed of eligible treasury bonds, financial bonds and enterprise bonds on the inter-bank market, the SSE and the SZSE. The base day of the CSI Aggregate Bond Index is December 31, 2002, with the base point of 100. Given the practical conditions of China's bond market, the CSI Aggregate Bond Index stands out its innovative compilation in the following 3 aspects:
Firstly, model pricing mechanism is introduced for an effective solution to the influence that priceless and abnormal-price bonds exert on distorted index. Constituents' model price is calculated on a daily basis and is compared with their market price. Once discrepancy between the above two prices exceeds to some extent, model pricing mechanism will be adopted. Secondly, bonds' model price should be as close to their actual value as possible. When the yield curve is created, measures including elimination and supplement of outliers from data and model parameter setting will be taken to guarantee the curve's veracity, the model price's veracity and accurate reflection of bonds' yield to maturity and duration. Thirdly, price information, including inter-bank offers and biddings, offers and biddings of the SSE Fixed Income Platform, inter-bank weighted closing price, the SSE and the SZSE closing prices, should all be considered in price selection and term structure formatting, so as to render bond price used in index calculation to be close to its actual price.
With the government strategy for a vigorous development of the bond market in full swing, the bond market will loom as an ever-important sector, bringing about more and more bond-related products. The timely introduction of the CSI Aggregate Bond Index will donate more references for investors in bond investment analysis and investment decisions. It is learnt that the year-period index of the CSI Aggregate Bond Index will be introduced at the same time.
The CSI will provide the market with the CSI Aggregate Bond Index' daily closing data, yield to maturity, duration and convexity on its website of www.csindex.com.cn. Upon operation for some time, the index will be introduced to the market through the SSE Fixed Income Platform and satellite system.
For the compilation method and details about the CSI Aggregate Bond Index, please refer to the CSI website.
