Deutsche Bank announced today it has launched the first investable benchmark index for offshore Renminbi (CNH) bonds, allowing sizeable passive fund flows to enter the market for the first time. Known as the Deutsche Bank Offshore Renminbi Bond Index Tracker (DB ORBIT), the transparent, rules-based index is publicly quoted on Bloomberg (ticker: DBCNH) from today and available to institutional investors in CNH, US dollars and Hong Kong dollars.
Vishal Goenka, Head of Local Currency Credit Trading, Asia at Deutsche Bank, said: “The creation of an entry point for passive fund flows represents a significant milestone in the development of the CNH bond market. Improving market access not only raises the profile of CNH bonds amongst investors globally but ultimately strengthens the market’s role as a reliable source of RMB financing by boosting secondary market liquidity.”
DB ORBIT is designed to be a highly transparent, liquid and replicable benchmark for CNH bonds, with active two-way prices. As such, it tracks CNH bonds and certificates of deposit with a minimum issuance size of CNH1 billion and at least 12 months to maturity. It will be calculated in CNH and rebalanced on a monthly basis.
“We hope the liquid nature of this index, along with our visibility in secondary trading, will see it become the benchmark for the CNH bond market,” said Mr Goenka.
As of July 2011, the index represents a total market capitalisation of CNH72.33 billion, with an average duration of 2.55 years and annualized index return (in US dollars) of 7.38%.
Secondary market liquidity in CNH bonds continues to grow, with monthly volumes rising from approximately CNH200 million in January 2011 to CNH3 billion as of July this year, according to Deutsche Bank estimates. At the same, levels of primary issuance have jumped, from CNH35.68 billion in 2010 to CNH85.32 billion as of 15 July 2011, according to Bloomberg.
Deutsche Bank is committed to the development of CNH through all facets of foreign exchange, capital markets, credit trading and transaction banking. The bank was among the first to execute CNH cross-currency swaps, CNH forwards and the first to allow electronic execution via its on-line trading platform, Autobahn FX. Deutsche Bank’s dedicated CNH trading desk manages a significant amount of daily trading volumes while regular, dedicated research (Deutsche Bank’s CNH Market Monitor) serves to keep investors and corporations informed on the latest developments and trends shaping the market.
Full details of the Deutsche Bank offshore Renminbi bond index can be found at https://index.db.com
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