Bloomberg Fixed Income Indices December 15, 2023
Bloomberg Fixed Income Index Methodology 47
the month.
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This allows for one full month of accrued interest to be calculated.
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The only
exception is the US MBS Index, for which end-of-month index returns are calculated assuming
that the trade date and the settlement date are the last calendar date of the month.
Series-B Index Settlement Assumptions
Series-B inflation-linked and nominal government bond indices assume local market settlement
conventions and holiday calendars, which vary from market to market, ranging from T+1
business days to T+3 business days for certain linker markets. Because this index family uses
different conventions, an index user may see a different accrued interest value or index ratio
calculated for the same security in a Series-B versus a Series-L index.
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Ex-Dividend Conventions
The ex-
dividend date is the first date on which the holder of a bond is not entitled to receive the
next interest payment. Securities in certain markets, such as the UK Gilt market, trade with ex-
dividend dates, and the accrued interest of affected securities will reflect the appropriate
conventions of a given market. Index users will see the accrued interest of a bond show as
negative once it starts trading ex-dividend and the expected coupon payment discounted back
to the current index settlement day in Returns Universe calculations.
The Bloomberg Indices employ
a regional approach for index
holiday schedules
Holiday Calendars
The
Bloomberg Indices employ a regional approach for index holiday schedules, as opposed to
using a single holiday calendar for all indices or basing production on the calendars of each of
the 39 currencies currently represented by the indices. The regional holiday calendar followed
by each currency covered in the indices can be found in Figure 14. Single-currency indices are
not produced if the calendar that currency follows is on holiday. Publication of multi-currency
global and regional indices that include bonds following different holiday calendars is discussed
in the following sections.
Publication of Global Indices
Multi-
currency indices, such as the Global Aggregate Index, are generated every business day of
the year except for New Year’s Day, the only holiday shared by all regional calendars. During
other regional holidays, global indices are still generated but use prices from the previous
business day for markets on holiday. On July 4, for example, the US Aggregate Index is not
produced because the US holiday calendar observes Independence Day. USD-denominated
bonds in the Global Aggregate Index, which is still produced, show a price from the previous
business day.
Publication of Regional Indices
Regional, multi-currency indices that share more than one holiday calendar are generated as
long as any market followed by one of the eligible currencies is open.
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In these cases, the price
from the previous business day for markets on holiday is used and total returns of the indices
still include currency returns from updated FX rates and coupon return from accrued interest
being generated.
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This applies to both Series-L and Series-B indices.
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Cash is therefore recognized by the index on the last calendar day before the coupon record date. For example, if a coupon record date is the first of the month, cash
will be recognized in the Returns Universe on the last day of the previous month under this settlement assumption. This is a common question from index users, in
particular when a security coupon date is close to a month-end, but the settlement/payment date occurs in the ensuing month.
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This question often comes up when comparing US TIPS securities that trade on a T+1 business day basis. On a Friday or the last business day of the month, the
settlement assumption may extend further than the next calendar day assumed by the T+1 calendar methodology. Series-L US TIPS bonds settle on a T+1 calendar day
basis (or if month end - on 1
st
calendar day of next month), whereas Series-B US TIPS bonds that trade on Friday would settle on Monday (or Tuesday if Monday is a US
holiday).
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Prior to July 2011, the Asian-Pacific Aggregate and EM Local Currency Government Indices were published based on Japanese market holidays only, with the
exception of China and India, which already used their own regional calendars. On July 1, 2011, four additional Asian bond market calendars (Australia, Hong Kong, South
Korea and Singapore) joined the Japanese calendar to determine the index publication schedule for the Asian-Pacific Aggregate Indices. Additionally, the publication
schedule for Asian-Pacific currencies in the EM Local Currency Indices added three Asian bond market calendars (Hong Kong, South Korea and Singapore). From August
19, 2022, onwards, Asian-Pacific Indices follow local holiday schedules based on bond currency. From October 10, 2023, onwards, indices that contain ARS, BRL, CAD
(except inflation-linked), CLP, COP, MXN, or PEN-denominated bonds also follow local holiday schedules. While a market is observing a holiday, the bonds will carry
forward the last trading day’s data until the market is open again.