NEW YORK -- Salomon Brothers Inc. Tuesday introduced an international bond index that tracks about $1.9 trillion of fixed-rate govenment bonds from nine industrial countries and will offer guides to interest rate and currency differentials.
The index, called the Salomon Brothers World Government Bond Index, weights government bond values according to the size of the market for the United States, Japan, Britain, West Germany, France, Canada, the Netherlands, Australia and Switzerland.
The $1.9 trillion in the index constitutes 81 percent of outstanding issues of governments, Eurobonds and foreign bonds in the nine countries.
The index could be valuable for institutional investors in putting together an international bond portfolio. Individuals will be able to participate through specialized mutual funds and 'sometime in the future, through direct purchases,' said Martin Leibowitz, managing director in charge of Salomon's portfolio analysis group.
The index will enable investors not only to gauge returns on a diversified portfolio, it will detail the comparable return of a single currency portfolio compared to those of other currencies. For example, one could compare performance of Britain's government securities compared to debt issued by all the other countries.
In addition to weighted returns on bonds, Salomon said the index could be a guide to profit opportunities from interest rate differentials and and currency fluctuations.
Salomon will publish the index monthly in U.S. dollar and local currency terms. Returns will also be cross-calculated in terms of other major base currencies.
In addition, Salomon will measure performance in the government bond markets outside the investor's base currency. For example, a non-U.S. dollar index will report the weighted performance of non-dollar markets in the index.