BofA launches emerging markets local-currency non-sovereign indexes

By Angela McDaniels

Tacoma, Wash., Oct. 30 - BofA Merrill Lynch Global Research announced the launch of new indexes designed to track the performance of local-currency non-sovereign emerging markets fixed-rate debt.

The new series includes four flagship indexes that are described below plus 33 sub-indexes that segment the market by currency, rating and sector.

LCCB

The BofA Merrill Lynch Broad Local Emerging Markets Non-sovereign index (ticker "LCCB") is the broadest of the indexes.

Constituents are capitalization weighted with no caps on country or issuer exposures.

The index has bond size filters set by county that are about $75 million to $100 million.

As of Sept. 30, the market value of the index is $168 billion, it includes 284 issuers and 625 bonds, its yield to worst is 5.28%, and its effective duration is 4.37 years.

LCCD

The BofA Merrill Lynch Diversified Broad Local Emerging Markets Non-sovereign index (ticker "LCCD") is a more liquid, diversified version of LCCB.

The index has bond size filters set by county that are about $150 million to $200 million, or double the caps of the LCCB index.

Issuer and currency limits are set at 2% and 10%, respectively. Issuer limits take priority when both cannot be met.

As of Sept. 30, the market value of the index is $142 billion, it includes 199 issuers and 389 bonds, its yield to worst is 7.69%, and its effective duration is 4.27 years.

LOCM

The BofA Merrill Lynch Local Emerging Markets Non-sovereign index (ticker "LOCM") is the same as LCCB but excludes sukuks.

Constituents are capitalization weighted with no caps on country or issuer exposures.

The index has bond size filters set by county that are about $75 million to $100 million.

As of Sept. 30, the market value of the index is $139 billion, it includes 253 issuers and 513 bonds, its yield to worst is 5.5%, and its effective duration is 4.16 years.

LOCL

The BofA Merrill Lynch Diversified Local Emerging Markets Non-sovereign index (ticker "LOCL") is a more liquid, diversified version of LOCM.

The index has bond size filters set by county that are about $150 million to $200 million, or double the caps of the LOCM index.

Issuer and currency limits are set at 2% and 10%, respectively. Issuer limits take priority when both cannot be met.

As of Sept. 30, the market value of the index is $118 billion, it includes 177 issuers and 321 bonds, its yield to worst is 7.68%, and its effective duration is 4.2 years.

Index rules

The indexes include fixed-rate debt of emerging markets non-sovereign issuers that is denominated in an emerging market currency and that settles on Euroclear. Debt issued by central governments, central banks and supranationals is excluded from the indexes.

The indexes are rebalanced monthly.

Dual-currency bonds, or bonds denominated in an emerging markets currency but that settle in a hard currency such as dollars, are included.

Bonds must have a time to maturity at issuance of at least 18 months and a remaining time to maturity of at least one month. Callable perpetual securities are included as long as they are at least one month from the first call date.

The indexes include only fixed-rate securities, including fixed-to-floating and fixed-to-variable coupons.

Inflation-linked securities and certificates of deposit are excluded.

BofA estimates the local-currency non-sovereign market at more than $4 trillion, including non-Euroclear issues.

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