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S&P Launches CDS Sovereign Indexes

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Standard & Poor’s announced Monday the launch of a series of CDS Sovereign indices designed to track the credit default swap market for sovereign entities. The series includes S&P International Developed Nation Sovereign CDS Index and S&P Eurozone Developed Nation Sovereign CDS Index. Credit default swaps are over-the-counter, tradable credit derivative contracts that have generally been viewed as similar to insurance policies.

The International index emulates the country constituents and weightings included in the S&P/Citigroup International Treasury Bond (ex U.S.) Index in its construction. The Eurozone index similarly emulates the country constituents and weightings as the S&P Eurozone Government Bond Index in its construction.

At inception of each index series, the country constituents and weights for each index are set. At the rollover date, there will be a new series launch, with the weights and constituents of that series’ respective bond indices. Both indices have a 5¼-year maturity, measured from the effective date.

J.R. Rieger, vice president of fixed income indices at S&P, said in a statement, "The feedback that we have received from some market participants is that sovereign CDS indices should be more representative of the portfolio holdings and market weights. The launch of the S&P CDS Sovereign Indices not only meets this market demand, but allows users of the Indices to directly make comparisons to the international bond market while offering a perspective on the cost of default protection based on those market weights."