The board of directors of the Tel-Aviv Stock Exchange (TASE) announced that they have approved (June 7th, 2018) the launch of a new corporate bonds index – the “Tel Bond-Dollar Index”. The index will consist of dollar-linked corporate bonds listed on TASE. Following the launch of the new index, TASE will be calculating 29 Tel Bond indices, 10 of which were launched in 2017 and 6 additional indices were launched since the beginning of 2018.
The new index was formulated by TASE to expand and diversify the products traded on TASE. In light of the fact that the yield on dollar-linked corporate bonds is higher than the yield on CPI-linked and shekel bonds, the launch of products that will track the Tel Bond-Dollar index which based on highly-rated dollar-linked bonds listed on TASE, is likely to be attractive for investors. Major Investors expects high demand for the lucrative index. According to some estimates, the launch might encourage certain companies to issue dollar-linked bonds, including foreign companies that have already issued bonds in Tel Aviv. Moreover, the products tracking the index will also serves as a hedging tool exposure to volatility in the shekel/dollar exchange rate.
The Tel Bond-Dollar Index will be composed solely of dollar-linked bonds, which have been rated with at least an A- rating by Maalot or an A3 rating by Midroog. The maximum weight for any bond series that will be included in the index will be 12% and the maximum number of series for a single issuer will be limited to two (in other words, the maximum weight per issuer will be 24%).
Key statistics of Tel Bond-Dollar Index, as of June 6th, 2018, are as follows (the index simulation is appended):
- Market cap. – approximately NIS 13.4 billion
- Number of series – 14
- Number of issuers – 11
- Weight of largest Issuer (Tamar Petroleum) – 24%
- Dominant sub-sector – oil and gas exploration (57%)
- Weighted gross IRR – 5.7%
- Weighted duration – 4.2 years
- Dominant characteristic – companies from the oil and gas exploration sector
Due to the yield of the index being high, in relation to the rating segment of the bonds included therein, the index will be placed in the “local bond yields family”, alongside the Tel Bond-Yields Index, the Tel Bond-Yield NIS Index and the Tel Bond-Global Index.
The record date for determining the composition of the index will be at the close of trading on June 21st, 2018.
The index will be launched on July 8th, 2018.