Indexing Developments
By Journal of Indexes Staff

Home Price Indexes Slow Their Descent
The S&P/Case-Shiller Home Price indexes, while grim, showed some mildly positive signs for February.

For the first time in 16 months, the benchmarks’ fall didn’t set new records for year-over-year losses, according to the monthly results released in late April.

In fact, 16 of the 20 metro areas saw smaller losses in February than in January, although all 20 metro areas covered by the indexing series produced a monthly decline in February. All in all, average U.S. home prices are at similar levels to where they were in the third quarter of 2003. From the peak in mid-2006, the 10-City Composite Index was down 31.6 percent and the 20-City Composite was down 30.7 percent through February 2009.

On an annualized basis, three metro areas fared the best: Dallas dropped 4.5 percent and turned in the best performance, while Denver fell some 5.7 percent and Boston lost 7.2 percent. The three worst-performing cities continue to be from the Sun Belt: Phoenix was down 35.2 percent, with Las Vegas and San Francisco down 31.7 percent and 31 percent, respectively.

CDR Rolls Out Government Risk Index

In late March, Credit Derivatives Research LLC launched a new index designed to track the creditworthiness of leading sovereign debtors. The Government Risk Index tracks credit default swap spreads for the United States, the United Kingdom, Germany, France, Italy, Spain and Japan.

Sovereign CDS essentially insure a buyer against a credit event, like a default, related to the issuing country’s debt. With governments taking actions like buying up toxic assets in the wake of the credit crisis, thereby increasing risk levels, CDS costs have also increased.

S&P Introduces Risk-Controlled Indexes

S&P rolled out two new strategy indexes in mid-May designed for risk-weary investors that are alternate versions of two of its best-known benchmarks—the S&P 500 and the S&P/ASX 200, which tracks the Australian market.

The S&P 500 Risk Control 10% Index and the S&P/ASX 200 Risk Control 15% Index target different levels of volatility—10 percent and 15 percent, respectively, as the indexes’ names would imply. The indexes adjust their exposure to match their volatility levels, either decreasing exposure when volatility of the original index is too high or using leverage to increase exposure when the volatility of the original index is too low.

The index provider already offered risk-controlled versions of its benchmark indexes covering the BRIC countries, Southeast Asia, Latin America and the global infrastructure sector.

Barclays Unveils Global Target ‘Exceed’ Index

May saw the launch of a new strategy index from Barclays Capital via its “Exceed” family of indexes. The Barclays Capital Global Target Exceed Index, like all the indexes in the Exceed series, according to Barclays, “aims to extract alpha from term premium in the short end of the yield curves in a fully transparent and liquid way by trading libor futures contracts.”

Barclays already has a few indexes of this nature tracking the yield curves of the U.S dollar and the euro, alone and in combination, but the new index provides exposure to the yield curves of four currencies: the U.S. dollar, the euro, the British pound and the Japanese yen.

Barclays says the index’s performance can be accessed via a range of investable products including swaps, options and principal-protected notes, among others.

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