The Pfandbrief 2011 | 2012

account of its macro strategy, has to underweight peripheral European countries, for instance,
orientation to the iBoxx EUR Covered Index leads by definition to a tracking error. In order to
account for this, correct benchmarking is accomplished through individually calculated indices
– which may be composed of sub-indices of an existing index family.
In the following, we will present an overview of select covered bond indices, their composition,
and the most important index rules.
Citigroup Covered Bond Index
Citigroup’s definition of covered bonds covers all Pfandbriefe and covered bonds issued principally
in the Euro region. In 1997, Citigroup introduced the Jumbo Pfandbrief Index. It is a
component of the Euro Broad Investment-Grade (EuroBIG) Index and a part of the Collateralized
sub-category. Citigroup sets the Jumbo criteria for the index, such as minimum volume
of EUR 1 billion, fixed-income coupon, and at least five market makers.
Barclays Covered Bond Indizes
Covered bonds can be found in a number of Barclays indices. For instance, they are contained,
in particular, in the Global Aggregate Bond Index, in which they represented 4.1% of the total
volume as of October 2009, in the Pan-European Aggregate Bond Index, at 10.6%, in the
Sterling Aggregate Bond Index, at 0.4%, in the Asian Pacific Aggregate Bond Index, and in
the aggregated indices U.S. Universal Bond Indices, at 0.2%, and the Pan-European Universal
Index, at 10.4%. The fundamental selection criteria for including bonds in the respective
indices are normally an outstanding minimum volume of EUR 300 million (or GBP 200 million
or USD 300 million), an investment-grade rating, a minimum time to maturity of one year, a
fixed-income coupon, and public placement of the bond.
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PEX
The Pfandbrief index PEX, which is listed on the Deutsche Börse, consists of 30 characteristic
synthetic Pfandbrief issues having maturities of one to ten years in one-year increments and
with each having coupons of 6%, 7.5%, and 9%. The PEX is calculated using the yields from
transactions entered into by the Pfandbrief issuers or for which they have set rates. In addition,
there are sub-indices for maturities buckets of one to ten years. Each of the characteristic
Pfandbriefe is weighted with its market share. The weighting matrix was ascertained from the
market structures of three interest cycles and is reviewed annually. The overall PEX index is
calculated in three steps: (i) calculation of zero-coupon yields (spot rates) from the reported
yield data, (ii) valuation of 30 synthetic Pfandbriefe with a remaining time to maturity of one
to ten years and of the three coupon classes, and (iii) weighting of these 30 bond prices and
aggregation into the PEX price index. Using the PEX, the PEXP performance index can be
determined, which reflects the value trend of a hypothetical Pfandbrief portfolio with no with-