S&P launches index of high-grade variable-rate demand obligations

By Devika Patel

Knoxville, Tenn., Sept. 23 - Standard & Poor's announced the launch of the S&PNational Municipal AMT-Free VRDO Index.

The new index seeks to measure the performance of investment-grade, variable-rate demand obligations (VRDO) issued by municipalities with maturities greater than or equal to one month.

Variable-rate demand obligations are short-term tax-exempt fixed-income instruments whose coupon rate is reset on a periodic basis. These securities are usually issued with maturities up to 30 or 40 years, although they are considered short-term instruments because they include a bondholder put provision, which coincides with the periodic coupon rate reset.

The new index is a market value-weighted index. In order to be included in the index, the issuer for the security must be a state - including the Commonwealth of Puerto Rico and United States territories - a local government or an agency where interest on the security is exempt from U.S. federal income taxes.

"The launch of the S&PNational Municipal AMT-Free VRDO Index is consistent with our theme of building fixed-income indices that focus on the most liquid aspects of the markets we serve," vice president of fixed-income indexes J.R. Rieger said in a press release.

"It was created with a strict focus on liquidity, and can thereby serve as the underlying for potential product creation."

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.