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The author would like to thank Florian Guth for his contributions to this blog.

As fixed income indexing solutions continue to evolve and innovate, one particular area of focus has been fixed maturity indices. Fixed maturity indices have existed in the U.S. for over 10 years, where adoption and growth continue to be strong. However, the market in Europe is newer, with fixed maturity constructs taking shape only over the last 18 months. While the European market remains in its early stages, adoption has accelerated, with total assets in Fixed Maturity ETFs exceeding USD 7 billion¹ since the first launch in 2023.

S&P DJI is excited to announce the launch of two new fixed maturity indices:

1. The iBoxx EUR Liquid High Yield 2027 3-Year Rolling
   • High Yield: This is the first fixed maturity index focusing on European high yield credit in the marketplace, offering a measurement of one of the higher yielding areas of European fixed income, in a fixed maturity construct.
   • Liquidity: This index draws from the well-established iBoxx EUR Liquid High Yield Index family, with selection criteria that focus more on liquidity of the bonds than its broader benchmark.
   • Rolling Maturity: This fixed maturity index has an innovative feature that is also new to the market in that it continues to roll into a subsequent three-year index, as opposed to expiring the way traditional fixed maturity indices do.
2. The iBoxx Sovereigns Italy & Spain Fixed Maturity 2029 Index: Has unique exposure within sovereigns, combining two countries that have historically had higher yields relative to the broader European sovereign benchmark.

As fixed maturity solutions expand across Europe, we take a closer look at the construction and utilization of fixed maturity indices, and how these two new indices offer innovation in construction and exposure.

What is a Fixed Maturity Index? How Does it Differ from a Broad Fixed Income Index?

A fixed maturity index measures bonds that expire within the same maturity year, often mentioned in the name of the index. If the final year of the fixed maturity index is 2030, the index would typically include bonds that mature in 2030. During the final year of the index, 2030, maturing bond proceeds would be invested into money market instruments. By the end of the year, the index would have converted to an index of money market instruments and would then typically expire. The “maturing” nature of a fixed maturity index is a key feature that differentiates it from a broad fixed income index, which typically remain in perpetuity.

Why is it Interesting That a Fixed Income Index “Matures”? How Are Fixed Maturity Indices Used?

The index maturing creates a similar profile to that of a maturing bond. As such, market participants could use fixed income indices in a similar way they use individual bonds with known expiration dates. This can be useful for managing duration and cash flows, or for building bond ladders with a series of maturing years. However, unlike individual bonds, bond indices may provide diversification benefits in that they represent a collection of bonds and may minimize transaction costs as individual bonds may be difficult to access.

How Is the iBoxx EUR Liquid High Yield 2027 3-Year Rolling Different? How Is It the Same?

The iBoxx EUR Liquid High Yield 2027 3-Year Rolling includes bonds with expirations from the same maturity year, from Oct. 1, 2026, to Sept. 30, 2027. This allows for the index to be used in the same manner as any fixed maturity index, whether to manage duration or cash flow needs. Throughout the final months of the maturity year of the index, bond proceeds are moved into an iBoxx EUR T-Bill Index.

After the final year, rather than expiring, the iBoxx EUR Liquid High Yield 2027 3-Year Rolling rolls into another three-year maturity index, putting weight back into high yield bonds with a three-year fixed maturity, extending the index to Sept. 30, 2030. The index continues to roll in three-year increments.

The rolling nature of this index is a unique feature in the fixed maturity market, providing the ability to roll into the next three-year maturity index, without having to experience the expiration of the index or having to reinvest proceeds.

The “Liquid” in the iBoxx EUR Liquid High Yield 2027 3-Year Rolling

The iBoxx EUR Liquid High Yield 2027 3-Year Rolling not only brings a EUR high yield credit option to the market but also does so in a liquidity enhanced way. Drawing upon the well-established iBoxx EUR Liquid High Yield index series, this index deploys the same criteria and methodology in measuring the liquid subset of the broad EUR high yield bond market. The index rules have been designed to offer a broad market coverage with an emphasis on liquidity to be suitable for OTC and exchange-traded derivatives, as well as ETFs. Higher minimum notional amounts and longer time to maturities are some requirements for the index constituents that aim to enhance liquidity in the index. This fixed maturity index takes a one-year maturity slice of the broader liquid EUR high yield index.

How Is the iBoxx Sovereigns Italy & Spain Fixed Maturity 2029 Index Unique versus the Rest of the Market?

The iBoxx Sovereigns Italy & Spain Fixed Maturity 2029 Index draws from the broader iBoxx EUR index series and includes sovereign debt issued by Spain and Italy with an expiration between Oct. 1, 2028, and Sept. 30, 2029. There is currently no other fixed maturity index that has this combination of sovereign countries. Historically, these two issuers have represented the higher-yielding end of the European sovereign debt spectrum. Both issuers generated higher returns among other Eurozone issuers in 2024.

We expect to see continued expansion in fixed maturity indexing solutions across Europe and other geographies, and S&P DJI is excited to be bringing these two innovative indices to market, offering investors greater insight into fixed income.

¹ Source: S&P Dow Jones Indices LLC. Data as of Jan. 31, 2025.

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