Eurozone Government Broad Indices
What are they?
The EuroMTS Government Broad Aggregate Index/Indices are Euro-denominated total return indices that include all Euro-denominated government bullet bonds listed on the MTS platform from the Eurozone sovereign issuers. (A bullet bond is a bond that is non-callable--not able to be redeemed prior to maturity--and therefore has a single repayment of principal on maturity date.) The MTS platform is the principal trading system for Eurozone debt securities. Eligible bonds must have at least € 2 billion outstanding and at least 12 months to maturity. Each issuer is represented by all their bonds meeting the eligibility criteria, as opposed to a maximum of two bonds per issuer and per maturity included in the Eurozone Government Bond Indices (EMTX). The EMTXg is composed of seven maturity band sub-indices as well as three country indices: MTS Deutschland Government, MTS France Government and MTS Italy Government Indices, each composed of the Euro-denominated issues of the respective governments, listed on the MTS platforms.
Underlying bond prices for the indices are the bid prices supplied by more than 1,000 participants representing over 200 financial institutions on the MTS, the principal trading system for Eurozone debt securities. Equal to 100 on 31 December 1998, the indices are calculated in real time from 09:00 to 17:30 CET, with two daily fixings at 11:00 and 16:00 CET. Each is rebalanced monthly. Sub-indices are calculated for specific maturity ranges: 1-3 years; 3-5 years; 5-7 years; 7-10 years; 10-15 years; and 15+ years (including 15-25 years; and 25+ years). Information on rules, composition and underlying prices is available at www.euromtsindices.com .
Why do I care?
The EuroMTS Government Broad Indices measure the broad performance of the Eurozone government bond markets, illustrating trends in total return to investors. Investors may choose to use this index as a benchmark against which to measure the performance of their own Euro-denominated bond holdings. Because bonds issued by sovereign governments carry the government’s guarantee, they are generally considered safer than other non-government bond investments whose yields are often quoted in relation to yields on government bonds with similar maturities. The maturity sub-indices of the EuroMTX index may be used to chart a Eurozone yield curve showing the difference in yields across the maturity spectrum. Yields at shorter maturities are typically lower than yields at longer maturities, reflecting the lower risk of short-term investments. The shape of the yield curve is often viewed as an indicator of economic conditions. For example, in rare instances when short-term yields are higher than long-term yields, the yield cure is said to be inverted, and the bond market is thought to be anticipating an economic slow-down or recession.