JP Morgan index launch enhances transparency of US ABS market

Nov 3rd, 2015 | By | Category: Fixed Income

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JP Morgan, a multinational financial services company, has unveiled a new asset-backed security (ABS) index covering over $450bn, or roughly 70%, of non-mortgage securitised products and other credit markets in the US. The JP Morgan ABS Index may serve as a future reference for investable tracking assets such as exchange-traded funds.

JP Morgan index launch enhances transparency of US ABS market

The JP Morgan ABS Index covers over $450bn, or roughly 70%, of non-mortgage securitised products in the US.

Amy Sze, Head of ABS Research at JP Morgan, commented: “With the launch of our ABS Index, we hope to provide greater insights into the ABS market, specifically on pricing and return performance across the full and wide spectrum of ABS asset classes.”

“The JP Morgan ABS Index offers extensive coverage of the ABS market with robust pricing on the underlying constituents and rigorous management of the index portfolio,” added Gloria Kim, Head of Global Index Research at J.P. Morgan.

The JP Morgan ABS Index represents over 2,000 instruments and is weighted according to the market capitalisation of individual sectors within the ABS industry. As of 3 November 2015, the largest sectors within the index were student loans (33.4%), automobile and equipment loans (29.5%), credit card loans (26.3%) and floorplan loans (5.2%). The index is also divided between fixed rate instruments (49.9%) and floating rate instruments (50.1%).

Investors may wish to use the index as a new portfolio management tool, analysing pricing trends and identifying relative value across the various sectors. It offers deeper analysis by providing the average duration and credit rating of each individual sector as well as the index as a whole. As of 3 November 2015, the duration of the total ABS index was 2.9 years and its credit rating was AA+.

JP Morgan has made available on their website the index’s historical performance as well as sector characteristics for the past three years.

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