/GGBS: Citi On The Knock On Impact Of GGB Inclusion In BBG Indices

Citi note that “Fitch’s upgrade of Greece to BBB- last Friday will result in GGBs being eligible for Bloomberg Euro Treasury index inclusion at the end-December rebalancing.”

• They estimate that “EUR85.3bn of bonds will be eligible for inclusion which excludes floating rate and step-up bonds, and bonds with amount outstanding less than €300mn.”
• “The weighted average duration of the GGB index should be 7.3 years, higher than the duration of the overall index and in line with the Bund/OAT indices.”
• “Post inclusion in the index, Greece will form 1.1% of the Euro Treasury index based on current market values. This implies a relatively small impact on the weights of other sovereigns.”
• “Our preliminary estimate for the overall month-end rebalancing, incorporating the impact of GGB inclusion, monthly supply and bonds dropping below 1-year of maturity, imply the largest decline in weighted duration for BTPs, OATs and Bunds.”