BarCap launches South African inflation index

Barclays Capital and the Bond Exchange of South Africa (Besa) have launched an index of South African government inflation-linked bonds.

The index succeeds an earlier benchmark, produced by BarCap alone since 2002. Besa said its involvement will make the index an independent and reliable benchmark for investors in the young market.

BarCap and Besa will calculate the index from Besa's daily price-fixing data, which provides information on all local fixed-interest securities. Oversight will come from a committee with members from Besa, the Actuarial Society of South Africa and various bond market participants.

Besa chief executive, Garth Greubel, said the oversight arrangements will add transparency to the market. BarCap's head of index products, John Williams, added: "The launch of the index should help boost liquidity in South Africa’s inflation-linked bond market and help draw in international investors."

In early August this year, the market capitalisation of the South African government inflation-linked market totalled R57.8bn ($8.9bn), representing more than 11% of total central government debt. The government is committed to the issuance of inflation-linked debt it issues via auction on a twice-monthly basis.

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