Standard & Poor’s has launched Canada’s first independent fixed-income index, developed in collaboration with CIBC World Markets, RBC Capital Markets, and TSX Inc.

The S&P/TSX Canadian Bond Index is designed to broadly represent the market performance of investment-grade bonds issued by Canadian companies and by issuers in the government sector. The index is comprised of 901 issues with a total market value of $608 billion on March 31. It will be calculated daily and rebalanced monthly.

The index is a market value-weighted average of total bond returns, and can be subdivided into as many as 300 standard subindices based on a variety of security characteristics including term to maturity, sector, and credit classifications.

“Investors now have access to independent benchmarks for measuring and comparing investment performance in both the equity and debt capital markets,” said Steve Rive, vice president of Canadian Index Services at Standard & Poor’s.

“There are clear market benefits from the establishment of a comprehensive independent debt market index that is powered by pricing from multiple liquidity providers,” said Richard Nesbitt, CEO, TSX Group. “Our involvement exemplifies our continued commitment to improve fixed-income market transparency and efficiency through the introduction of innovative data, trading, and valuation products and services.”

The S&P/TSX Canadian Bond Index is the first index of its kind in Canada that is not managed by a party directly involved in the trading or underwriting of bonds, and that features multidealer pricing for index-valuation purposes. A bond must have a minimum of two price providers to be eligible for inclusion in the Index. CIBC World Markets and RBC Capital Markets are the initial price providers.

“Until now fixed-income indices in Canada have been limited to single-dealer pricing,” said Rob Palombi, director of Canadian Fixed Income Research at Standard & Poor’s. “A key advantage of using multipricing sources is that index valuations are more representative, capturing a broad array of market expectations and, therefore, providing investors with a more objective measure of market performance.”

The index is maintained by the S&P/TSX Canadian Bond Index Committee. And, it will endeavour to reflect user needs through consultation with a broadly representative Advisory Panel, which includes a variety of members of the investment community.