Rules Changes for the Bloomberg Barclays Canada Aggregate Index Announced

Bloomberg today announced several methodology changes to the Bloomberg Barclays Canada Aggregate Index family.  These changes arose from Bloomberg’s ongoing global index review and governance process, including feedback from the Canada Index Advisory Council conducted with domestic market participants in December 2017.  Effective August 1, 2018, the Bloomberg Barclays Canada Aggregate Index family will see the following modifications and enhancements, some of which have Global Aggregate Index implications, as specified below.

Minimum Amount Outstanding

The minimum amount outstanding for securities eligible for the Canada Aggregate Index will be reduced from CAD300mn to CAD150mn.  This change will result in approximately 347 securities being added to the Canada Aggregate Index, equivalent of C$ 71 billion in amount outstanding (approximately 5% of the Canada Aggregate) in order to better represent corporate issuance in Canada.  The Canada Aggregate Index in its entirety will be included in the Global Aggregate Index.

Inclusion of DBRS Ratings

DBRS bond ratings will be employed in the determination of index credit quality classifications for CAD-denominated securities in the Canada Aggregate and Global Aggregate Indices.  This change will result in approximately 49 securities being added to the Canadian Aggregate Index, equivalent of C$10 billion in amount outstanding.  The current methodology uses the median rating from three rating agencies to assign an index rating.  The new methodology will take four ratings into account, remove the highest and lowest ratings among the four, and then use the lower of the two remaining ratings to assign an index rating.  If fewer than four ratings are available for a given security, the existing methodology using three or fewer ratings will be employed.

Exclusion of Bonds from Euro and Asia Markets of Issue

Bonds with certain markets of issue will be excluded from Canada Aggregate indices to address accessibility challenges faced by Canada domestic investors. Specifically, bonds with market of issue of “Euro MTN” or “Euro Non-Dollar” will be excluded. Bonds from these markets of issue will remain included in the Global Aggregate Index.

Eligibility of Bail-In Bonds and Non-Viability Contingent Capital Bonds

Bail-in bonds that are expected to be issued starting in Q3 2018 will be included in Canada Aggregate indices. Non-viability contingent capital (NVCC) bonds will continue to be included in and eligible for Canada Aggregate indices.

Additional Index Offerings

In order to represent the market structure of the Canada fixed income market, Bloomberg will launch the following new Canada Aggregate sub-indices by August 1, 2018:

• Maple and Domestic
• Provincials
• Municipals
• Federal Agency
• Federal Non-Agency

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