Nomura launches G-sec index

Mumbai: Global investment bank Nomura on Monday launched an index for the government bonds – a tracking tool which investors can replicate to generate better returns – and is first of its Asia ex-Japan series.

The USD 510-billion Government bond market is one of the largest in Asia, excluding Japan, stimulating demand for a bond index with good liquidity and coverage, the bank said.

It can be noted that the government bond market has more than doubled in the past six years to USD 510 billion as of end-2010.

"Our index is focused on liquid bonds, and therefore is highly replicable, while at the same time, offers a high degree of coverage," said Nomura local markets rates research for Asia ex-Japan head Des Supple in a release from Hong Kong.

The Nomura index incorporates a quarterly liquidity enhancement rule to determine which bonds should be included in the index based on the monthly turnover of all outstanding issues. But liquidity rule is set at a level that ensures the index is not subject to a high turnover rate, thus limiting transaction costs, and allowing for an index comprising as many as 26 bonds worth USD 252 billion, as of end of February.

The index, which measures the total return performance of the Government bonds denominated in the rupee, is the first of Nomura`s Asia ex-Japan series and is aimed at measuring bond market performance of individual countries.

The index`s annual total return for 2010 was 5.76 per cent after its inception on December 30, 2005.