Markit iboxx EUR Rating Rules April 2010
Contents 1 Rating... 3 2 Rating Cut-Off Dates... 3 3 Markit iboxx Average Rating - Methodology... 3 4 Further information... 5 2
1 Rating All bonds in the Markit iboxx EUR index family must be rated investment grade by at least one of the following rating agencies: Standard & Poor s, Moody s or Fitch. If a bond is rated by several agencies, then the average rating is attached to the bond. If a tranche is not rated, the rating of its parent is applied. This rating determines whether the bond is eligible for the Markit iboxx EUR indices and to which rating index it belongs. Bonds in the Markit iboxx EUR Eurozone index do not need to be rated, but the individual countries are subject to a rating requirement. Countries included in the Markit iboxx EUR Eurozone indices require a long-term local currency sovereign debt rating of investment grade for their bonds to be eligible for the indices. The average rating of Fitch Ratings, Moody's Investors Service and Standard & Poor's Rating Services determines the index rating. The rating is consolidated to the nearest rating grade. Rating notches are not used. 2 Rating Cut-Off Dates Three business days before the end of each month, a membership list ("Constituents Super List") with final amount outstanding for each bond is published. This Constituents Super List contains the maximum number of constituents for the next month. Two business days before the end of the month, the rating information for the bonds on the Constituents Super List is updated and the list is adjusted for all rating changes occurring three business days prior to month-end after first publication. The resulting list is the final membership list for the following month and is published as soon as all rating changes are confirmed. Bonds that are upgraded to investment grade are not included unless they had previously been on the Constituents Super List. 3 Markit iboxx Average Rating - Methodology With effect from 1 January 2008 Markit iboxx EUR, GBP and USD investment grade indices use an average rating to determine a bond's index rating, rather than the lowest rating, which has been used thus far. The decision to move from lowest to average was taken following thorough consultation with the iboxx index committees and users, and is in line with the latest recommendation of the European Bond Commission. From 1 January 2008, each rating is assigned a number as follows: Fitch Moody s Standard & Poor s Score AAA Aaa AAA 1 AA+ Aa1 AA+ 2 AA Aa2 AA 3 AA- Aa3 AA- 4 A+ A1 A+ 5 A A2 A 6 A- A3 A- 7 BBB+ Baa1 BBB+ 8 BBB Baa2 BBB 9 BBB- Baa3 BBB- 10 BB+ Ba1 BB+ 11 BB Ba2 BB 12 BB- Ba3 BB- 13 B+ B1 B+ 14 B B2 B 15 B- B3 B- 16 3
CCC+ Caa1 CCC+ 17 CCC Caa2 CCC 18 CCC- Caa3 CCC- 19 CC Ca CC 20 C C C 21 D/RD D 22 Where more than one rating is available, scores will be added and the sum divided by the number of ratings. A noninteger result will be rounded to the nearest integer. E.g. 4.33 is rounded down to 4, while 4.5 is rounded to 5. The resulting number is converted to the iboxx index rating (iboxx only publishes rating grades without notches): Score iboxx Rating 1 AAA 2 AA 3 AA 4 AA 5 A 6 A 7 A 8 BBB 9 BBB 10 BBB 11+ Sub-investment grade 4
4 Further information For contractual or content issues please refer to International Index Company Limited/ Markit Group - Data Services - Goetheplatz 5 D - 60313 Frankfurt am Main Germany Tel +49 (0) 69 299 868 100 Fax +49 (0) 69 299 868 149 E-mail info@indexco.com For technical issues please refer to E-mail iboxx_tech@markit.com Licences and Data iboxx is a registered trademark of International Index Company Limited (IIC). IIC owns all iboxx data, database rights, indices and all intellectual property rights therein. A licence is required from IIC to create and/or distribute any product that uses, is based upon or refers to any iboxx index or iboxx data. Ownership IIC is a wholly-owned subsidiary of Markit Group. www.markit.com Other index products IIC owns, manages, compiles and publishes the itraxx credit derivative indices and the iboxxfx Trade Weighted Indices. 5