The Tel Aviv Stock Exchange (TASE) Board of Directors has approved the launch of a new index – Tel Bond–Floating, the tenth Tel Bond Index calculated by TASE. The index will be launched on November 2nd, 2014 and is expected to initially include 16 non-linked corporate bonds bearing floating rates with a total capitalization of approximately $3.6 billion. The bonds are drawn from the Tel-Bond universe, which currently incorporates 246 bonds with a total capitalization of approximately $64 billion.
TASE launch of the new index comes in light of the high demand for Tel-Bond products. Discussions held with market players including ETN issuers and passive investment mutual fund managers, institutional investors and bond traders confirmed the high demand for additional Tel Bond products. It is anticipated that the new index will attract investors expecting interest rate increases as well as investors seeking to diversify their corporate bond portfolio with floating rate instruments.
Floating rate bonds are currently under-represented in the Tel Bond indices (comprising only 6% of the Tel Bond-Universe index), having said that, the launch of the new index as well as the offering of products tracking are expected to contribute to the liquidity of these bonds.
The new index was designed to meet the criteria set for serving as underlying assets for TASE-traded index-tracking products. The credit rating threshold proposed for index constituents renders the index suitable for institutional investors.
The value of ETNs and passive mutual funds tracking all Tel Bond indices currently comes to approximately $7 billion. Products equaling approximately $1 billion have already been issued on 3 recently launched Tel Bond indices. To these one can add actively managed mutual funds and other products, some of which serve as tracking instruments without declaring this as policy.
Market players believe that the launch of a floating rate bond will in the long run awake interest in new offerings of this type of bonds, as was the case with the launch of the Tel Bond Non-linked index. At the time the index was launched there were only 19 series of non-linked bonds, while today 46 series of non-linked bonds are traded on TASE.
Robby Goldenberg, Senior Vice President and Head of the Trading, Derivatives and Indices Department remarked: “In launching the new index, TASE is implementing its policy of expanding the array of TASE indices and as a result, the variety of listed financial products tracking these indices. TASE will continue to accommodate the market needs to launch additional indices.”
