Markit To Launch First Synthetic Municipal Bond Index
Markit MCDX, a Municipal Bond Credit Derivative Index, Will Attract New Investment by Increasing Tradability and Liquidity
New York, NY - Markit, the leading provider of independent data, portfolio valuations and OTC derivatives trade processing, today announced plans to launch the Markit MCDX index, an index of 50 municipal bond credit default swaps, on May 6.
The index has been designed to meet investor demand for a liquid and transparent tool to gain exposure to municipal bonds, at a time when credit pricing has become increasingly important to municipal bond buyers.
“The Markit MCDX index will attract new investors to the market by increasing tradability and liquidity. As the world’s first independent synthetic municipal bond index, we expect it to become the benchmark for trading in this asset class,” said Niall Cameron, Executive Vice President and Head of Indices and Equities at Markit.
To ensure liquidity, the index market makers at launch will include Citi, Goldman Sachs, JPMorgan, Lehman Brothers, Merrill Lynch, Morgan Stanley and UBS, a group of dealers with a proven track record of success in municipal bond and credit derivative markets.
"We’re thrilled by the opportunity to be involved with the world’s first liquid and scalable instrument to hedge credit risk in the muni market and we expect this product to be very well received by investors," said Drew Loughlin, Managing Director for Municipal Derivative Trading at JPMorgan.
Markit, as administration, calculation and marketing agent for the Markit MCDX index, will employ its objective, rules-based approach to index construction and provide critical transparency by publishing daily closing prices on www.markit.com.
The Markit MCDX index will comprise 50 equally-weighted investment grade CDS, excluding tobacco and healthcare issuers. The table below shows the key characteristics of the index:
| Reference entities | 50 Excludes tobacco and healthcare issuers |
| Ratings | Minimum rating of Baa3 (Moody’s), BBB- (S&P), or BBB- (Fitch) that is not on negative watch for downgrade to below investment grade |
| Credit events | Failure to pay Restructuring |
| Coupon payment dates | March 20, June 20, September 20, December 20 |
| Roll dates | April 3, October 3 |
| Assumed recovery rate | 80% |
| Tenor | 3, 5, 10 years |
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For more information please contact:
John Dooley
Vice President, Corporate Communications
Markit
Tel: +44 (0)20 7523 6751
Email: john.dooley@markit.com
About Markit
Markit is the leading provider of independent data, portfolio valuations and OTC derivatives trade processing to the global financial markets. The company receives daily data contributions from 90 dealing firms, and its services are used by almost 1,000 institutions to enhance trading operations, reduce risk and manage compliance.
About Markit Indices
Markit owns and manages the pre-eminent credit derivative indices including Markit ABX, Markit CDX, Markit CMBX, Markit LCDX and Markit iTraxx. Markit acts as administration, calculation and marketing agent for the indices but is not party to index trading and does not track trading volumes.
For more information, see www.markit.com