The launch was originally scheduled for the first quarter of 2008, but S&P said it delayed for a year to drum up more market support - 2008 saw the first decline in multi-name CDS volumes outstanding, according to the International Swaps and Derivatives Association, which said in November that the amount fell 6.5% to $24 trillion in the first half of the year.
The new indexes are the S&P 100 CDS Index, covering the 82 members of the S&P 100 that have CDSs of sufficient liquidity, the S&P CDS US Investment Grade (IG) Index, which consists of 100 equally weighted investment-grade US corporate credits, and the S&P CDS US High Yield (HY) Index, which consists of 80 equally weighted high-yield US corporate credits. The composition of the S&P 100 CDS index will be adjusted based on changes in the membership of the S&P 100 and in the liquidity of members' CDS.
All the indexes were launched on January 21 and are available online, along with historical values for the indexes - the S&P 100 CDS Index and the S&P CDS US IG Index were back-dated to March 20 2007 and the S&P CDS US HY Index was back-dated to September 20 2007.
The S&P 100 CDS Index is the first to track the performance of the reference entities of an equity index. "The index seeks to provide a gauge as to the price of default protection on the S&P 100 Index and seeks to track the performance of investing in a portfolio or basket of CDSs of the entities within it," explains James Rieger, S&P's head of fixed-income indexes. "Market participants thought having the ability to look at different parts of the capital market structure would be beneficial, and this is a first step in that evolution."
Rieger revealed that the next move for S&P will be to create a bond index for the obligations of the same entities: "This will provide a perspective on the price of default protection and the performance of an investment in a portfolio of CDSs with the S&P 100 CDS Index, a view into the returns of investing in a portfolio of bonds with the pending bond index, and a view into the performance of the equities of those entities with the S&P 100 Index."