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TASE Launches 6 New Tel-Bond Indices - Four Indices Are Rating-Based And Two Are Sector-Based: Tel Bond-Shekel Banks & Insurance Index And Tel Bond-CPI Linked Real Estate Index

Date 29/01/2018

 

​TASE Has Launched 7 new Indices since the beginning of 2018 and a Record of 16 New Tel Bond Indices in Less Than a Year

On Jan 25th, 2018, the board of directors of the Tel-Aviv Stock Exchange (TASE) has approved the launch of four new rating-based corporate bond indices and the launch of two new sector-based corporate bond indices – the Tel Bond-Shekel Banks & Insurance Index and the Tel-Bond CPI Linked Real Estate Index.

Following the launch of the new indices, TASE will calculate total of 28 Tel-Bond indices, 16 of which have been launched in 2017 and 6 more indices will be launched in Feb. Overall, it was decided to launch a record number of 7 new indices since the beginning of the year.

Rating-Based Tel Bond Indices

The specifications of the four new indices are as follows:
  • "Tel-Bond CPI Linked A” Index – This index will include bond series, which are included in the Tel-Bond CPI Linked Index, and which have been given a Midroog rating in a ratings range of between (A3) and (A1) or which have been given a Maalot rating in a ratings range of between (A-) and (A+). 
  •  "Tel-Bond CPI Linked AA-AAA” Index – This index will include bond series, which are included in the Tel-Bond CPI Linked Index, and which have been given a minimum Midroog rating of (Aa3) or which have been given a minimum Maalot rating of (AA-). 
  • "Tel-Bond Shekel A” Index – This index will include bond series, which are included in the Tel-Bond Shekel Index, and which have been given a Midroog rating in a ratings range of between (A3) and (A1) or which have been given a Maalot rating in a ratings range of between (A-) and (A+). 
  • "Tel-Bond Shekel AA-AAA” Index – This index will include bond series, which are included in the Tel-Bond Shekel Index, and which have been given a minimum Midroog rating of (Aa3) or which have been given a minimum Maalot rating of (AA-).
The new indices will complement the diversity of Tel-Bond indices, with higher ratings segmentation, which will enable investors to segment their portfolios according to risk level. Market participants anticipate strong demand for these indices as they are viewed as “classic, mainstream indices”.
 
In February 2013, TASE launched the Tel Bond-Yields Index, in which are included CPI-linked bonds, with low ratings segmentation between (BBB-) and (A). In November 2015, TASE launched the Tel Bond-Yield Shekel Index, in which are included Shekel bonds, with a rating segmentation identical to that of the Tel Bond-Yields Index. The scope of the investments in instruments that track the Tel Bond-Yields Index and the Tel Bond-Yield Shekel Index is NIS 1.7 billion and NIS 0.7 billion, respectively.
 

Sector-Based Tel Bond Indices

The specification of the two new indices are as follows:
  • "Tel Bond-Shekel Banks & Insurance” Index – This index will include bond series of banks and insurance companies, which are included in the Tel-Bond Shekel Index. 
  •  “Tel Bond-CPI Linked Real Estate” Index – This index will include bond series of real estate companies, which are included in the Tel-Bond CPI Linked Index. These indices complement the Tel Bond-CPI Linked Banks Index and the Tel Bond-Global Index (which is characterized by shekel bonds of companies in the real estate sector).
The series of Tel-Bond sectoral indices, which will consist of 3-4 indices, will give investors exposure to debt issued in the real estate sector and in the banking and insurance sectors. Some 70% of the bond series included in the Tel-bond indices have been issued by companies in the real estate, banking and insurance sectors. Talks with market participants have revealed that, in the case of investing in bond portfolios, they perceive a high correlation between banks and insurance companies – particularly from the aspect of regulatory oversight, which is becoming more stringent in relation to the management of the financial risks in these two sectors. In light of this, the solution being proposed by TASE will provide greater diversity among the issuers in the index.
 
Data regarding the breakdown of the series (as of 26.10.17) are as follows:
 
Sector
No. of series
Market value of series
Bonds
Percentages
In NIS billions
Percentages
Real estate
147
47%
99
36%
Banks and insurance
79
25%
92
33%
Other
89
28%
87
31%
Total
315
100%
278
100%

Date for the launch of the indices:
The new indices will be launched on 25 February, 2018, with the record date for the purpose of determining the composition of the indices having been set for 11 February, 2018. 

 - The characteristics and data relating to the indices are set forth in the appendix to this notice.
 

Appendix – Main Characteristics and Data of the New Indices

The principal characteristics and data regarding the indices are as follows1 :

Rating-Based Tel Bond Indices

Main characteristics:
  • The indices will be composed of CPI-linked, fixed interest bonds. 
  • The maximum weight for a bond series included in each index – 3%, with the exception of Tel-Bond Shekel AA-AAA Index with a maximum weight cap of 6%.
  • Number of series per issuer will be limited to 6 (maximum weight per issuer – 18%) in each index, with the exception of the Tel-Bond Shekel AA-AAA with number of series per issuer to be limited to 3 (maximum weight per issuer – 18%).
1. Tel-Bond CPI Linked A
  • Market value – NIS 43 billion. 
  • Number of series – 66. 
  • Number of issuers – 36. 
  • Weight of largest issuer (Delek Group) – 7.02%. 
  • Weighted gross internal rate of return – 1.54%. 
  • Weighted duration – 3.82 years.
2. Tel-Bond CPI Linked AA-AAA
  • Market value – NIS 115.7 billion. 
  • Number of series – 82. 
  • Number of issuers – 29. 
  • Weight of largest issuer (Poalim) – 16.85%. 
  • Weighted gross internal rate of return – 0.94%. 
  • Weighted duration – 4.13 years.
3. Tel-Bond Shekel A Index
  • Market value – NIS 41.3 billion. 
  • Number of series – 76. 
  • Number of issuers – 58. Weight of largest issuer (Ashtrom) – 5.17%.
  • Weighted gross internal rate of return – 2.95%.
  • Weighted duration – 3.76 years.
4. Tel-Bond Shekel AA-AAA Index
  • Market value – NIS 40.9 billion. 
  • Number of series – 45. 
  • Number of issuers – 30. 
  • Weight of largest issuer (Mizrahi) – 17.59%. 
  • Weighted gross internal rate of return – 1.7%. 
  • Weighted duration – 4.49 years.

1 - Based on a simulation conducted on October 26, 2017.

Sector-Based Tel Bond Indices

1. Tel Bond-Shekel Banks & Insurance
Main characteristics: 
  • The index will be composed of unlinked, fixed interest bonds. 
  • Bonds that will be included in the index will have a minimum Maalot rating of (A-) or a minimum Midroog rating of (A3).
  • The maximum weight for a bond series included in each index – 6%. 
  • Number of series for each issuer will be limited to 4 (maximum weight per issuer – 24%).
Additional data:
  • Market value – NIS 22 billion. 
  • Number of series – 24. 
  • Number of issuers – 12. 
  • Weight of largest issuer (Mizrahi) – 18%. 
  • Weighted gross internal rate of return – 1.6%. 
  • Weighted duration – 4.78 years.
2. Tel Bond-CPI Linked Real Estate
Main characteristics: 
  • The index will be composed of CPI-linked, fixed interest bonds. 
  • Bonds that will be included in the index will have a minimum Maalot rating of (A-) or a minimum Midroog rating of (A3). 
  • The maximum weight for a bond series included in each index – 3%. 
  • Number of series for each issuer will be limited to 5 (maximum weight per issuer – 15%).
Additional data:
  • Market value – NIS 63 billion. 
  • Number of series – 76. 
  • Number of issuers – 33. 
  • Weight of largest issuer (Gazit-Globe) – 11.6%. 
  • Weighted gross internal rate of return – 1.42%. 
  • Weighted duration – 4.47 years. 
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