S&P to launch Credit Default Swap Indices

Standard & Poor’s, the world’s leading index provider, announced that it is set to launch three U.S. based Credit Default Swap (CDS) indices focused in the $28.8 trillion Credit Derivatives Market. The S& P U.S. Investment Grade CDS Index, the S& P U.S. High Yield CDS Index and the S& P 100 CDS Index will be launched during the first quarter of 2008. A credit default swap is an agreement between two parties to exchange the credit risk of an issuer.

Standard & Poor’s will offer two forms of CDS indices that reflect the performance of a basket of single name credit default swaps. The first type of index will incorporate all credit events that have occurred into its pricing, while the other will effectively remove the relevant credit from a given index when a credit event occurs.

New series of indices will be generated every six months to maintain sufficient liquidity and to accurately reflect changes in the credit market. Standard & Poor’s is using CMA DataVision, the credit information specialist, as its primary source of pricing for the indices.

“The S& P U.S. CDS Indices are designed to be liquid and efficient enough to support investment products such as index funds, index portfolios and derivatives,” says David Blitzer, Managing Director and Chairman of the Index Committee at Standard & Poor’s. “We expect a good amount of interest in these indices by both institutional investors and dealers alike.”

Standard & Poor’s will launch three U.S. based CDS indices:

The S& P U.S. Investment Grade CDS Index will consist of 100 equally weighted investment grade U.S. corporate credits

The S& P U.S. High Yield CDS Index will consist of 80 equally weighted high yield U.S. corporate credits

S& P 100 CDS Index will consist of the 80-90 members of the S& P 100 Equity Index that have CDS with sufficient liquidity. The weight of each constituent in the 100 CDS Index will correspond to its weight in the 100 Equity Index (based on float adjusted equity market capitalization)

The complete methodology for the S& P U.S. CDS Indices will be made available on standardandpoors.com/indices when the indices are launched during the first quarter of 2008.