Markit, the provider of independent data, portfolio valuations and OTC derivatives trade processing, plans to launch the Markit MCDX index, an index of 50 municipal bond credit default swaps, on 6 May 2008.
The index has been designed to meet investor demand for a liquid and transparent tool to gain exposure to municipal bonds, at a time when credit pricing has become increasingly important to municipal bond buyers.
“The Markit MCDX index will attract new investors to the market by increasing tradability and liquidity. As the world’s first independent synthetic municipal bond index, we expect it to become the benchmark for trading in this asset class,” says Niall Cameron, executive vice president and head of Indices and Equities at Markit.
To ensure liquidity, the index market makers at launch will include Citi, Goldman Sachs, JPMorgan, Lehman Brothers, Merrill Lynch, Morgan Stanley and UBS, a group of dealers with a proven track record of success in municipal bond and credit derivative markets.
“We’re thrilled by the opportunity to be involved with the world’s first liquid and scalable instrument to hedge credit risk in the muni market and we expect this product to be very well received by investors,” says Drew Loughlin, managing director for Municipal Derivative Trading at JPMorgan.
Markit, as administration, calculation and marketing agent for the Markit MCDX index, will employ its objective, rules-based approach to index construction and provide critical transparency by publishing daily closing prices on www.markit.com.
The Markit MCDX index will comprise 50 equally-weighted investment grade CDS, excluding tobacco and healthcare issuers.