Franco-German-Benelux-Finland core now represents 60% of Index,
with the Portugal, Ireland, Greece and Spain grouping down to under 18%….
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Highlights of Eurozone country government bond performance over the first six months of 2010, as measured by the S&P Eurozone Government Bond Index with country data supplied by Credit Suisse, include:
• German government debt has provided the best year to date return at 6.99%, more than double the S&P Eurozone Government Bond Index total return of 2.67%, followed by the Netherlands at 6.72% and then Austria at 6.69%
• Greek bonds lost over 18% of value, though Greek debt finalised stabilised in June, gaining 1% in the month
• France had a solid six months with a 5.65% total return, while Italy was only just in positive territory with a 0.77% return
• Spanish bonds fell by 2.41%, the worst performance of the big four Eurozone members
The S&P Eurozone Government Bond Index consists of European Government Bonds and seeks to measure the performance of the Developed European Government Bond market. All European Government Bonds with maturities over one year are included, with the exception of inflation indexed, floating rate, and zero coupon bonds. The bond must be issued by a country that is classified as a “Developed Country” by the Bank of International Settlements (BIS) in its international debt securities statistics, and within the Euro-zone. The Index is a rules based, market-value-weighted index.
JR Rieger of S&P Indices commented: “The first six months of 2010 have seen, by the standards of government bond markets, quite dramatically diverging performance by the sovereign constituents of our Eurozone Government Bond Index”.
In addition, as a result of this diverging market performance, and differential net new supply, the composition of the index has also shifted noticeably over the last six months:
• France, Germany, the Benelux and Finland now represent 59.84% of the Index, compared with 58.32% at the start of the year
• The weight of Portugal/Ireland/Greece/Spain debt combined is down to 17.88% of the Index compared with 18.93% at the start of the year
• Greek debt now accounts for just over 4% of the index, compared with 5.26% at the start of the year
• When the index was launched in November 2009, Italy was the largest component at 23.3%, but this is now down to 22.06%, equal with German debt which has risen slightly in index weight over the period
JR Rieger continued: “Government bond markets are like huge glaciers, so these apparently small shifts in index weight over just a six month period are quite significant”.
Total return performance by country in the 6 months to end June 2010 are as follows:
Germany 6.99%
Netherlands 6.72%
Austria 6.69%
Slovenia 6.31%
Slovakia 6.23%
Finland 6.15%
France 5.65%
Belgium 4.03%
Italy 0.77%
Ireland -1.32%
Spain -2.41%
Portugal -5.56%
Greece -18.81%
S&P Eurozone Government Bond Index – country weighting
31/12/2009 30/6/2010
Austria 3.85% 3.90%
Belgium 6.01% 6.01%
Germany 21.87% 22.06%
Spain 9.42% 9.27%
Finland 1.20% 1.20%
France 20.15% 20.98%
Greece 5.26% 4.26%
Ireland 1.88% 2.10%
Italy 22.74% 22.06%
Netherlands 5.24% 5.69%
Portugal 2.37% 2.25%
Source: ETFWorld – Standard & Poor’s
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