Eurozone Government Bond Indices

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What are they?

The EuroMTS Index, a Euro-denominated total return index, includes the Eurozone’s largest and most widely traded sovereign debt securities. Eligible bonds must have at least € 2 billion outstanding and at least 12 months to maturity. There are maximum two bonds per country and per maturity band within this index. Component bonds are selected to represent the relative weighting of each country’s outstanding debt within the Eurozone.

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 platform, 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 Index tracks the performance of the largest and most widely traded Euro-denominated government bonds, illustrating trends in total return. 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 curve is said to be inverted, and the bond market is thought to be anticipating an economic slow-down or recession.