- New index isolates the credit spread component to provide a standardised gauge of credit market conditions in Canada
- Montréal Exchange selects index as foundation for first-of-its kind credit derivatives product that allows market participants to manage Canadian credit risk
FTSE Russell today announces the launch of the FTSE Canada Bank Credit Spread Index; an innovative benchmark designed to capture the dynamics of Canadian corporate credit risk.
The FTSE Canada Bank Credit Spread Index captures the yield differential, or spread, between a reference basket of Canadian Bank bonds and their benchmark Government of Canada securities, as a measure of Canadian financial sector credit risk. The new index offers insights into credit risk dynamics within the Canadian investment grade market, facilitating informed decision making for investors.
The index series addresses the need for a domestic representative spread product that isolates credit risk exposure while focusing on liquid securities to balance capacity, tradability and spread movement.
Construction of the FTSE Canada spread index involves the following stages:
- Creation of the FTSE Canada Reference Basket – a liquid representation of the domestic FTSE Canada Corporate Financial Bank Bond Index with simple and transparent screening and selection criteria
- Mapping to Government of Canada securities – Government of Canada bonds are identified and mapped to bonds in the Credit Reference Basket with matching market values
- Calculation and aggregation of the FTSE Canada Bank Credit Spread Index – spread is calculated as the yield differential between the corporate bonds in the Reference Basket and the respective Government of Canada bond.
Marina Mets, Head of Americas, Fixed Income and Convertibles at FTSE Russell, comments:
“Following extensive research and analysis, we are proud to introduce the FTSE Canada Bank Credit Spread Index, a unique and innovative benchmark designed to represent the dynamics of the Canadian corporate credit market. We are committed to fostering evolution in the markets we serve and have worked closely with key industry partners to support the development of credit risk solutions for the Canadian market.”
Also announced today, the Montréal Exchange has selected the FTSE Canada Bank Credit Spread Index as the foundation for a new, first-of-its-kind credit derivative product, Canada Bank Credit Index Futures (CBC) which will launch in 2026, providing market participants with a powerful tool to manage credit exposure, hedge risk, and implement strategic investment views. See more information here.
Robert Tasca, Managing Director, Derivatives Products and Services at Montreal Exchange, said:
“The introduction of the FTSE Canada Bank Credit Spread Index is a major milestone for the Canadian credit industry. We are pleased to collaborate with FTSE Russell to offer the first exchange-traded Canadian credit derivative contract, which is expected to launch in early 2026. This innovative contract will allow participants to manage their credit risk in a cost-efficient way.”
For more information, visit the FTSE Russell website.
