MSCI FIXED INCOME
INDEX CALCULATIONMETHODOLOGY
December 2023

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MSCI FIXED INCOME INDEX CALCULATION METHODOLOGY | DECEMBER 2023

Contents
1

Introduction .......................................................................................................... 3

2

MSCI Fixed Income Indexes .................................................................................. 4

3

MSCI Fixed Income Index Return Calculation Methodology ................................... 5
3.1

Market value of a Fixed Income Security ............................................................. 5

3.2

Market value and Cash calculations .................................................................... 6

3.3

Security Level Total Return Calculation ............................................................... 8

3.4

Index Level Total Return Calculation .................................................................. 10

4

Corporate Events Treatment ............................................................................... 125

MSCI Index Level Datapoints .............................................................................. 14

6

Appendix ............................................................................................................ 17© 2023 MSCI Inc. All rights reserved.

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MSCI FIXED INCOME INDEX CALCULATION METHODOLOGY | DECEMBER 2023

1

Introduction
This methodology book describes MSCI’s general Index calculation methodology for the MSCI Fixed
Income Indexes.
These policies and guidelines affect all securities across the MSCI Fixed Income Indexes andproducts. Unless otherwise stated the policies and guidelines apply therefore to all securities in the
MSCI Fixed Income universe.
Please note that the index construction methodology, input data specification and other guiding
principles for MSCI Fixed Income Indexes can be found at www.msci.com.

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2

MSCI Fixed Income Indexes
MSCI Fixed Income Indexes measure the performance of a set of fixed income securities over time.
They are calculated using the Laspeyres’ concept of a weighted arithmetic average together with theconcept of chain-linking.
MSCI calculates its fixed income indexes in “local” currency as well as in USD. Index levels are alsoavailable in several other currencies such as EUR, GBP etc. While the local currency series of indexes
cannot be replicated in the real world, it represents the theoretical performance of an index without
any impact from foreign exchange fluctuations i.e., a continuously hedged portfolio.
MSCI Fixed Income Indexes are calculated 5 days a week, from Monday to Friday. However, theindex levels may not change on days that are noted as holidays as per the MSCI Fixed Income Datamethodology1
MSCI also reviews its fixed income indexes on an ongoing basis to account for the following:•

If an index constituent is no longer priced (intra-rebalancing) by the pricing source or the price isunavailable, the last available price is used.

•

MSCI, at times, may use a price different from the last available price provided, including 0.00 in
the case of as default or missed interest payment. MSCI will employ procedures as noted in the
MSCI Fixed Income Data Methodology document relevant to pricing.

Please see Appendix 4.4 for detailed policy around handling of missing data and use of alternate
data sources.
Announcements with relevant information pertaining to MSCI Fixed Income Indexes will be made at
6 p.m. EST and calculated Index levels will be distributed at end of each business day at 7 p.m. EST.

1 MSCI Fixed Income Data Methodology on https://www.msci.com/index-methodology© 2023 MSCI Inc. All rights reserved.

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3

MSCI Fixed Income Index Return Calculation Methodology
The total return index measures the change in market value of a Fixed Income portfolio over a given
period relative to a starting base date value. This includes, return from fixed income security price2
movements, exchange rate fluctuations, coupon income earned as well as P&L generated fromredemption of principal.

3.1

Market value of a Fixed Income Security
Market Value of a security is defined as the product of its notional amount outstanding and dirty
price. Dirty price of the security is calculated by adding its clean bid price and accrued interest3.
Therefore, market value of the security accounts for daily changes in price and interest accrued fromthe fixed income security.

𝐷𝑃𝑡,𝑗 = 𝑃𝑡,𝑗 + 𝐴𝑡,𝑗 − − − (1)𝑀𝑉𝑡,𝑗 =

𝐷𝑃𝑡,𝑗 ∗ 𝑁𝑡,𝑗 ∗ 𝐾𝑡,𝑗
− − − (2)100

Where:
𝑃𝑡,𝑗 – Clean Bid Price of the security j at the close of day t
𝐴𝑡,𝑗 - Accrued Interest of the security j at the close of day t 4
𝐷𝑃𝑡,𝑗 - Dirty Price of the security j at the close of day t
𝑁𝑡,𝑗 - Amount Outstanding of the security j at the close of day t
𝑀𝑉𝑡,𝑗 – Market Value of the security j at the close of day t
𝐾𝑡,𝑗 – Security Inclusion Factor of the security j at the close of day t

2 In the document term price refers to price of the fixed income security, unless explicitly stated otherwise. Please refer to MSCI

Fixed Income Data Methodology for detailed specification on input data points.
3 Please refer to MSCI Fixed Income Glossary for definition of the technical terms used in the document.
4 Please refer to Appendix – Section 4.3 of the document for details in adjustment to accrued interest in the ex-coupon period.

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3.2

Market value and Cash calculations
In the MSCI Fixed Income Indexes, constituent securities accrue cash balance from regular interest
payments and principal redemptions in between two index reviews. The accrued cash is reinvested
across the index on the Rebalancing date.
Therefore, we define market value with cash as follows.
𝑀𝑉𝐶𝑡,𝑗 = 𝑀𝑉𝑡,𝑗 + 𝐶𝐶𝐵𝑡,𝑗 − − − (3)Where:

𝑀𝑉𝐶𝑡,𝑗 – Market Value with Cash of the security j at the close of day t
𝐶𝐶𝐵𝑡,𝑗 - Total cumulative cash balance of the security j at the close of day t
Total cumulative cash balance of the security is a summation of cash flow accrued from interest
payments and principal redemptions between last Rebalancing date and the return calculation date(t).
𝐶𝐶𝐵𝑡,𝑗 = 𝐶𝐶𝐵𝑡−1,𝑗 + 𝐶𝑎𝑠ℎ 𝑓𝑟𝑜𝑚 𝐶𝑜𝑢𝑝𝑜𝑛𝑡,𝑗 + 𝐶𝑎𝑠ℎ 𝑓𝑟𝑜𝑚 𝑅𝑒𝑑𝑒𝑚𝑝𝑡𝑖𝑜𝑛𝑡,𝑗 − − − (4)𝐶𝐶𝑃𝑡,𝑗 = 𝐶𝐶𝑃𝑡−1,𝑗 + 𝐶𝑎𝑠ℎ 𝑓𝑟𝑜𝑚 𝐶𝑜𝑢𝑝𝑜𝑛𝑡,𝑗 − − − (5)𝐶𝐶𝑅𝑡,𝑗 = 𝐶𝐶𝑅𝑡−1,𝑗 + 𝐶𝑎𝑠ℎ 𝑓𝑟𝑜𝑚 𝑅𝑒𝑑𝑒𝑚𝑝𝑡𝑖𝑜𝑛𝑡,𝑗 − − − (6)Where:

𝐶𝐶𝑃𝑡,𝑗 - Cumulative cash from coupon payments of the security j, accrued since last rebalancing
at the close of t
𝐶𝐶𝑅𝑡,𝑗 - Cumulative cash from principal redemption of the security j, accrued since last
rebalancing at the close of t
𝐶𝐶𝐵𝑡,𝑗 – Total cumulative cash balance of the security j accrued since last rebalancing at theclose of t
In case of a redemption or coupon payment event for a bond, cash from coupon and cash fromredemption are calculated using the formulae defined below.
𝐶𝑎𝑠ℎ 𝑓𝑟𝑜𝑚 𝐶𝑜𝑢𝑝𝑜𝑛𝑡,𝑗 =𝐶𝑜𝑢𝑝𝑜𝑛𝑗 /100
∗ 𝑁𝑡−1,𝑗 ∗ 𝐾𝑡,𝑗 5 − − − (7)𝐶𝑜𝑢𝑝𝑜𝑛 𝐹𝑟𝑒𝑞𝑢𝑒𝑛𝑐𝑦𝑗

Where:
𝐶𝑜𝑢𝑝𝑜𝑛𝑗 – Annual coupon rate of the bond j
𝐶𝑜𝑢𝑝𝑜𝑛 𝐹𝑟𝑒𝑞𝑢𝑒𝑛𝑐𝑦𝑗 – Coupon payment frequency of bond j. For instance, it is common forcorporate bonds to pay coupon semi-annually which implies a coupon frequency of 2.

5 Please refer to Appendix – Section 4.3 for details on calculation of cash from coupon for bonds with a provision for ex-coupon

period.

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𝐶𝑎𝑠ℎ 𝑓𝑟𝑜𝑚 𝑅𝑒𝑑𝑒𝑚𝑝𝑡𝑖𝑜𝑛𝑡,𝑗 = (𝑅𝑃𝑡,𝑗 + 𝐴𝑡,𝑗) ∗ (𝑁𝑡−1,𝑗 − 𝑁𝑡,𝑗 ) ∗ 𝐾𝑡,𝑗 − − − (8)100Where:
𝑅𝑃𝑡,𝑗 - Redemption Price of security j at the event effective day t. It is the price at which the security
is redeemed by the issuer. This price may vary from the current market price of the security. If thedata for redemption price is unavailable, then it is assumed to be the clean bid price of the security jat the close of t.

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3.3

Security Level Total Return Calculation
MSCI calculates daily security level total return to account for changes in•Market Price•

Accrued interest•

Cash generated from interest payments.

•

Cash generated from redemption or prepayment of the outstanding principal.

•

Exchange Rate•

Corporate Events

Daily security level total return between t-1 and t is calculated using the following formula. Note that
Adjusted MVC is treated appropriately to account for corporate events. Please refer to Section 2 fordetails.

𝑈𝑆𝐷
𝑆𝐿𝑇𝑅𝑡−1,𝑡,𝑗=(

𝐴𝑑𝑗𝑢𝑠𝑡𝑒𝑑 𝑀𝑉𝐶𝑡,𝑗− 1) − − − (9)𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝑀𝑉𝐶𝑡,𝑗𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝑀𝑉𝐶𝑡,𝑗 = 𝑀𝑉𝐶𝑡−1,𝑗 ∗ 𝐹𝑋𝑡−1,𝑗 − − − (10)𝐴𝑑𝑗𝑢𝑠𝑡𝑒𝑑 𝑀𝑉𝐶𝑡,𝑗 = 𝑀𝑉𝐶𝑡,𝑗 ∗ 𝐹𝑋𝑡,𝑗 − − − (11)Where:
𝐹𝑋𝑡,𝑗 – Foreign exchange rate applicable for security j at the close of day t
𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝑀𝑉𝐶𝑡,𝑗 – Market value inclusive of cash with which security j is included in the opening
index portfolio for return calculation on day t
𝐴𝑑𝑗𝑢𝑠𝑡𝑒𝑑 𝑀𝑉𝐶𝑡,𝑗 - Market value inclusive of cash for security j adjusted for changes in price,interest and / or principal on day t
Note that 𝐴𝑑𝑗𝑢𝑠𝑡𝑒𝑑 𝑀𝑉𝐶𝑡,𝑗 calculation shown above pertains to return calculation in base currency
which is USD. In case of return calculation in “local” currency, the following formula is employed.

𝑙𝑜𝑐𝑎𝑙
𝑆𝐿𝑇𝑅𝑡−1,𝑡,𝑗=(

𝑀𝑉𝐶𝑡,𝑗− 1) − − − (12)𝑀𝑉𝐶𝑡−1,𝑗

MSCI decomposes security level total return calculation into the following components for
attribution purposes.

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3.3.1 Security Level Price Return
Price return of the security in local currency is calculated using the following formula–𝑙𝑜𝑐𝑎𝑙
𝑆𝐿𝑃𝑅𝑡−1,𝑡,𝑗=

𝑃𝑡,𝑗− 1 − − − (13)𝑃𝑡−1,𝑗Where:
𝑃𝑡,𝑗 – Clean Bid Price of the security j at the close of day t

3.3.2 Security Level Income Return
Income Return of the security in local currency represents part of total return that is earned via
regular interest payments as well as interest accrued over time in between interest payment dates.
Income return also accounts for P&L generated when principal is paid out at a premium or adiscount as compared to closing clean bid price of the security on the effective date of the corporate
event.

𝑙𝑜𝑐𝑎𝑙
𝑆𝐿𝐼𝑅𝑡−1,𝑡,𝑗=

𝑙𝑜𝑐𝑎𝑙
1 + 𝑆𝐿𝑇𝑅𝑡−1,𝑡,𝑗
𝑙𝑜𝑐𝑎𝑙
1 + 𝑆𝐿𝑃𝑅𝑡−1,𝑡,𝑗− 1 − − − (14)3.3.3 Currency
Fixed Income securities denominated in foreign currency will be impacted by the movement of
exchange rate between foreign and local currency. MSCI captures return from exchange rate
movements using the following formula.

𝐹𝑋𝑅𝑡−1,𝑡,𝑗 =𝐹𝑋𝑡,𝑗− 1 − − − (15)𝐹𝑋𝑡−1,𝑗Accounting for FX movements, local total and price returns can be converted into total and pricereturns of various currencies (e.g., USD, EUR, GBP etc.) using the following formulae –

𝑈𝑆𝐷
𝑙𝑜𝑐𝑎𝑙
𝑆𝐿𝑇𝑅𝑡−1,𝑡,𝑗= (1 + 𝑆𝐿𝑇𝑅𝑡−1,𝑡,𝑗) ∗ (1 + 𝐹𝑋𝑅𝑡−1,𝑡,𝑗 ) − 1 − − − (16)
𝑈𝑆𝐷
𝑙𝑜𝑐𝑎𝑙
𝑆𝐿𝑃𝑅𝑡−1,𝑡,𝑗= (1 + 𝑆𝐿𝑃𝑅𝑡−1,𝑡,𝑗) ∗ (1 + 𝐹𝑋𝑅𝑡−1,𝑡,𝑗 ) − 1 − − − (17)© 2023 MSCI Inc. All rights reserved.

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3.4

Index Level Total Return Calculation
Index level total return can be calculated using the below formula 𝑛
𝑈𝑆𝐷
𝑀𝑉𝐶 6
𝑈𝑆𝐷
𝐼𝑛𝑑𝑒𝑥 𝑇𝑅𝑡−1,𝑡= ∑ 𝑆𝐿𝑇𝑅𝑡−1,𝑡,𝑗∗ 𝑜𝑝𝑒𝑛𝑖𝑛𝑔 𝑤𝑡𝑡,𝑗− − − (18)
𝑗=1
𝑛
𝑙𝑜𝑐𝑎𝑙
𝑀𝑉𝐶
𝑙𝑜𝑐𝑎𝑙
𝐼𝑛𝑑𝑒𝑥 𝑇𝑅𝑡−1,𝑡= ∑ 𝑆𝐿𝑇𝑅𝑡−1,𝑡,𝑗∗ 𝑜𝑝𝑒𝑛𝑖𝑛𝑔 𝑤𝑡𝑡,𝑗− − − (19)𝑗=1Where:
opening wt 𝑀𝑉𝐶
𝑡,𝑗 – Opening weight of security j in the index including market value and cash on
day t
opening wt 𝑀𝑉𝐶
𝑡,𝑗 =𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝑀𝑉𝐶𝑡,𝑗𝑛∑𝑗=1 𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝑀𝑉𝐶𝑡,𝑗

3.4.1 Index Level Total Return Attribution
Security level attribution outlined earlier in Section 1.3 is extended to the index level by aggregating
security level price and income returns using the weighted average method. Daily Index level total
return is attributed into the following two parts –•Daily Index Level Price Return (Index PR)•

Daily Index Level Income Return (Index IR)

They are calculated as shown in the formulae below –
𝑛
𝑈𝑆𝐷
𝑀𝑉𝐶
𝑈𝑆𝐷
𝐼𝑛𝑑𝑒𝑥 𝑃𝑅𝑡−1,𝑡= ∑ 𝑆𝐿𝑃𝑅𝑡−1,𝑡,𝑗∗ 𝑜𝑝𝑒𝑛𝑖𝑛𝑔 𝑤𝑡𝑡,𝑗− − − (20)
𝑗=1
𝑛
𝑙𝑜𝑐𝑎𝑙
𝑀𝑉𝐶
𝑙𝑜𝑐𝑎𝑙
𝐼𝑛𝑑𝑒𝑥 𝑃𝑅𝑡−1,𝑡= ∑ 𝑆𝐿𝑃𝑅𝑡−1,𝑡,𝑗∗ 𝑜𝑝𝑒𝑛𝑖𝑛𝑔 𝑤𝑡𝑡,𝑗− − − (21)𝑗=1

𝑈𝑆𝐷
𝐼𝑛𝑑𝑒𝑥 𝐼𝑅𝑡−1,𝑡=𝑈𝑆𝐷
1 + 𝐼𝑛𝑑𝑒𝑥 𝑇𝑅𝑡−1,𝑡𝑈𝑆𝐷 − 1 − − − (22)
1 + 𝐼𝑛𝑑𝑒𝑥 𝑃𝑅𝑡−1,𝑡6 Note that on the effective date of index rebalancing, certain variants of the index total return are adjusted to account fortransaction costs. Details on transaction cost adjustment to the total return variant is outlined in the Appendix – Section 4.1.

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𝑙𝑜𝑐𝑎𝑙
𝐼𝑛𝑑𝑒𝑥 𝐼𝑅𝑡−1,𝑡=𝑙𝑜𝑐𝑎𝑙
1 + 𝐼𝑛𝑑𝑒𝑥 𝑇𝑅𝑡−1,𝑡𝑙𝑜𝑐𝑎𝑙 − 1 − − − (23)
1 + 𝐼𝑛𝑑𝑒𝑥 𝑃𝑅𝑡−1,𝑡3.4.2 Calculation of Index Levels
Generally, MSCI will calculate and publish three variants of the index levels. They will start with thebase value (example: 1000) and will be calculated by chain-linking of appropriate daily index returns.
Formulae shown below are example of chain-linking daily index returns in USD between period t-s
and t to calculate index levels in USD. A similar approach is used on daily index returns in local
currency to calculate index levels in local currency.

𝑈𝑆𝐷
𝑈𝑆𝐷
𝑇𝑅𝐼𝑡𝑈𝑆𝐷 = 𝑇𝑅𝐼𝑡−𝑠∗ [ ∏ [1 + 𝐼𝑛𝑑𝑒𝑥 𝑇𝑅𝑢−1,𝑢]] − − − (24)𝑡−𝑠<𝑢≤𝑡
𝑈𝑆𝐷
𝑈𝑆𝐷
𝑃𝑅𝐼𝑡𝑈𝑆𝐷 = 𝑃𝑅𝐼𝑡−𝑠∗ [ ∏ [1 + 𝐼𝑛𝑑𝑒𝑥 𝑃𝑅𝑢−1,𝑢]] − − − (25)𝑡−𝑠<𝑢≤𝑡
𝑈𝑆𝐷
𝑈𝑆𝐷
𝐼𝑅𝐼𝑡𝑈𝑆𝐷 = 𝐼𝑅𝐼𝑡−𝑠∗ [ ∏ [1 + 𝐼𝑛𝑑𝑒𝑥 𝐼𝑅𝑢−1,𝑢]] − − − (26)𝑡−𝑠<𝑢≤𝑡

Where:
𝑇𝑅𝐼𝑡𝑈𝑆𝐷 – Total Return Index Level in USD at the close of day t
𝑃𝑅𝐼𝑡𝑈𝑆𝐷 – Price Return Index Level in USD at the close of day t
𝐼𝑅𝐼𝑡𝑈𝑆𝐷 – Income Return Index Level in USD at the close of day t© 2023 MSCI Inc. All rights reserved.

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4

Corporate Events Treatment
This section of the methodology book provides a description of the rules and guidelines followed by
MSCI for the treatment of corporate events within the MSCI Fixed Income Indexes.
Any exceptions to these rules are reviewed and approved by the MSCI Fixed Income Index
Committee (FIIC) and are publicly announced in advance of the implementation. This methodology
book focuses on the implementation of corporate events affecting securities across all the MSCI
Fixed Income Indexes and products.
MSCI endeavors to develop and maintain a set of corporate event implementation rules that are as
generic as possible and that can apply to any fixed income security included in the MSCI Fixed
Income universe.
Unless otherwise stated, the policies and guidelines apply therefore to all securities in the MSCI
Fixed Income universe.
For certain corporate events, MSCI applies a market value adjustment at the security level toneutralize (at least partially) the size movement due to the event and keep only the priceperformance in the index due to real market movement.
The policies and guidelines set forth apply in most corporate events cases. For corporate events notdescribed in this Methodology Book or combinations of different types of corporate events andother exceptional cases, MSCI reserves the right to determine the most appropriate implementation
method.
MSCI has identified three broad categories of corporate events based on their impact onoutstanding amount (size) of the security.
1) Outstanding amount decreases
2) Outstanding amount increases
3) Outstanding amount decreases, and new security is issued in exchange.

4.1

Outstanding Amount Decreases
MSCI treats decrease in amount outstanding of the security as redemption, thus the security level
cash balance is increased when the outstanding amount decreases. Formulaically, security level
return and market value calculation as described in section 1.2 and 1.3 handle such corporate
events implicitly.

4.2

Outstanding Amount Increases
Certain corporate events may result in an increase in the notional amount outstanding of the fixedincome security. MSCI handles these events by increasing the weight of the security in the opening
portfolio of the next business day. On the day of the event for the purposes of return calculation,
adjusted market value with cash of the security is calculated in the following manner.

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MSCI FIXED INCOME INDEX CALCULATION METHODOLOGY | DECEMBER 2023

𝐴𝑑𝑗𝑢𝑠𝑡𝑒𝑑 𝑀𝑉𝐶𝑡,𝑗 = 𝑀𝑉𝐶𝑡,𝑗 ∗ 𝐹𝑋𝑡,𝑗 ∗ (1 +(𝑃𝑡,𝑗 + 𝐴𝑡,𝑗 ) ∗ (𝑁𝑡−1,𝑗 − 𝑁𝑡,𝑗 ) ∗ 𝐾𝑡,𝑗
) − −(27)100 ∗ 𝑀𝑉𝐶𝑡,𝑗Note that in this event notional amount outstanding increases and no redemption income isgenerated.

4.3

Outstanding Amount Decreases, and a new security is issued in exchange
Securities in an index may be exchanged or restructured by the issuer where a security is issued in
exchange for another. In such cases, MSCI applies market neutral treatment and includes the
security / securities issued in exchange in the opening index portfolio of the next business day,provided it is eligible for index inclusion7.
If the security issued in exchange is not eligible, then the corporate event is treated as a redemption
event and the treatment is based on principles outlined in Section 2.1.
Security eligibility criteria is same as that defined in the relevant MSCI Corporate Bond Index
methodology.
In this case no cash is received from principal redemption, therefore Cash from Redemption and
Redemption Income as defined in Section 1.2 and Section 1.3.2 are set to zero. However, cash is
assumed to be paid out in case there is difference in the accrued interest between exchanged
security and “issued in exchange” security.
On the event effective day (t) for the purposes of return calculation, adjusted market value with cash
and cumulative cash balance of the security is calculated using the following formulae.
𝐶𝐶𝐵𝑡,𝑗 = 𝐶𝐶𝑃𝑡,𝑗 + 𝐶𝐶𝑅𝑡−1,𝑗 + (𝐴𝑑𝑗𝑢𝑠𝑡𝑒𝑑 𝑀𝑉𝐶𝑡,𝑗 = 𝑀𝑉𝐶𝑡,𝑗 ∗ 𝐹𝑋𝑡,𝑗 +𝐴𝑡,𝑗 − 𝐴𝑛𝑒𝑤𝑡,𝑗) ∗ (𝑁𝑡−1,𝑗 − 𝑁𝑡,𝑗 ) ∗ 𝐾𝑡,𝑗 − − − (28)
100

𝑛𝑒𝑤
(𝑃𝑡,𝑗
+ 𝐴𝑛𝑒𝑤𝑡,𝑗 ) ∗ (𝑁𝑡−1,𝑗 − 𝑁𝑡,𝑗 ) ∗ 𝐹𝑋𝑡,𝑗 ∗ 𝐾𝑡,𝑗− (29)
100

Where:
𝑛𝑒𝑤𝑃𝑡,𝑗– Clean bid price of the security issued in exchange of security j at the close of day t

𝐴𝑛𝑒𝑤𝑡,𝑗 – Accrued Interest of the security issued in exchange of security j at the close of day t

Note that to be included in the index, the securities issued in exchange must have price coverage at
the close of event effective date (t).

7 Eligibility is determined using the index construction rules of the underlying issuance-weighted parent index.

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MSCI FIXED INCOME INDEX CALCULATION METHODOLOGY | DECEMBER 2023

5

MSCI Index Level Datapoints
MSCI calculates aggregated index level data points for MSCI Fixed Income Indexes using weighted
average methodology, as shown in the formulae enlisted below.

Index Average Clean Price𝑛𝑁
AP𝑡 = ∑ 𝑃𝑡,𝑗 ∗ w𝑡,𝑗
− − − (30)𝑗=1Index Average Dirty Price𝑛𝑁
ADP𝑡 = ∑ 𝐷𝑃𝑡,𝑗 ∗ w𝑡,𝑗
− − − (31)𝑗=1

Index Average Coupon𝑛𝑁AC𝑡 = ∑ 𝐶𝑜𝑢𝑝𝑜𝑛𝑗 ∗ w𝑡,𝑗
− − − (32)𝑗=1

Index Average NotionalAN𝑡 =∑𝑛𝑗=1 𝑁𝑡,𝑗 ∗ 𝐾𝑡,𝑗𝑛

− − − (33)Index Average Time to Maturity𝑛𝑁TM𝑡 = ∑ 𝑇𝑀𝑡,𝑗 ∗ w𝑡,𝑗
− − − (34)𝑗=1𝑊ℎ𝑒𝑟𝑒, 𝑇𝑀𝑡,𝑗 =𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑑𝑎𝑦𝑠 𝑏𝑒𝑡𝑤𝑒𝑒𝑛 𝑀𝑎𝑡𝑢𝑟𝑖𝑡𝑦 𝐷𝑎𝑡𝑒 𝑎𝑛𝑑 𝑡
365

Index Average Modified Duration
𝑛
𝑀𝑂𝐷
𝑀𝑉𝐶
ADMOD
= ∑ 𝐷𝑡,𝑗∗ w𝑡,𝑗− − − (35)t
𝑗=1

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MSCI FIXED INCOME INDEX CALCULATION METHODOLOGY | DECEMBER 2023

Index Average Effective duration
𝑛
𝐸𝐹𝐹
𝑀𝑉𝐶
ADEFF
= ∑ 𝐷𝑡,𝑗∗ w𝑡,𝑗− − − (36)t𝑗=1Index Average Convexity𝑛
𝑀𝑉𝐶
AX t = ∑ 𝑋𝑡 ∗ w𝑡,𝑗
− − − (37)𝑗=1

Index Average Effective Convexity𝑛
𝑀𝑉𝐶
AEXt = ∑ 𝐸𝑋𝑡 ∗ w𝑡,𝑗
− − − (38)𝑗=1

Index Average Yield to Maturity𝑛
𝑀𝑉𝐶
AY𝑡 = ∑ 𝑌𝑡,𝑗 ∗ w𝑡,𝑗
− − − (39)𝑗=1

Index Average Yield to Worst𝑛
𝑀𝑉𝐶
AYWt = ∑ 𝑌𝑊𝑡,𝑗 ∗ w𝑡,𝑗
− − − (40)𝑗=1Index Average OAS𝑛𝐷𝑀𝑉OASt = ∑ 𝑂𝐴𝑆𝑡,𝑗 ∗ w𝑡,𝑗
− − − (41)𝑗=1

Index Average Credit Rating𝑛
𝑀𝑉𝐶
ARTt = ∑ 𝑅𝑇𝑡,𝑗 ∗ w𝑡,𝑗
− − − (42)𝑗=1

MSCI converts credit rating in letter from Moody’s and S&P by assigning each security with a creditscore using the table presented in the Appendix. Using the numerical scores, final credit rating scoreof the security is calculated as shown below.
𝑀𝑜𝑜𝑑𝑦′𝑠𝑊ℎ𝑒𝑟𝑒, 𝑅𝑇𝑡,𝑗 = max (𝑅𝑇𝑡,𝑗© 2023 MSCI Inc. All rights reserved.

𝑆&𝑃, 𝑅𝑇𝑡,𝑗)

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MSCI FIXED INCOME INDEX CALCULATION METHODOLOGY | DECEMBER 2023

Index level aggregated numerical credit rating score is rounded to the nearest integer and converted
back to a MSCI credit rating as presented in the table in the Appendix.

Weight calculation formulae, employed in evaluation of these index level metrics are enlisted below Market Value Weight with Cash
𝑀𝑉𝐶
w𝑡,𝑗
=

𝑀𝑉𝑡,𝑗 ∗ 𝐹𝑋𝑡,𝑗𝑛∑𝑗=1(𝑀𝑉𝑡,𝑗 + 𝐶𝐶𝐵𝑡,𝑗 ) ∗ 𝐹𝑋𝑡,𝑗Nominal Weight
𝑁
𝑤𝑡,𝑗
=

𝑁𝑡,𝑗 ∗ 𝐾𝑡,𝑗
∑𝑛𝑗=1 𝑁𝑡,𝑗 ∗ 𝐾𝑡,𝑗Effective Duration Adjusted Weight
𝐷𝑀𝑉
w𝑡,𝑗
=

© 2023 MSCI Inc. All rights reserved.

𝐸𝐹𝐹
𝑀𝑉𝑡,𝑗 ∗ 𝐹𝑋𝑡,𝑗 ∗ 𝐷𝑡,𝑗𝐸𝐹𝐹
∑𝑛𝑗=1 𝐷𝑡,𝑗∗ (𝑀𝑉𝑡,𝑗 + 𝐶𝐶𝐵𝑡,𝑗 ) ∗ 𝐹𝑋𝑡,𝑗

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MSCI FIXED INCOME INDEX CALCULATION METHODOLOGY | DECEMBER 2023

6

Appendix

6.1

Transaction cost adjustment on Index Returns
On the effective date of index rebalancing (t = s), certain variants of the total index return are
adjusted to account for transaction costs. The return adjustment for transaction costs reflects thefact that in replicating portfolio rebalancing, new index additions and securities where weight has
increased are traded at the ask price, whereas index deletions and securities where weight has
decreased are traded at the bid price. The formulae mentioned below calculates the impact of thebid-ask spread on the index total return.
𝐶𝑜𝑠𝑡 𝑡=𝑠 =∑𝑗= 𝑎𝑙𝑙 𝑏𝑜𝑛𝑑𝑠 𝑤𝑖𝑡ℎ 𝑖𝑛𝑐𝑟𝑒𝑎𝑠𝑒 𝑖𝑛
𝑤𝑡 𝑖𝑛𝑐𝑙𝑢𝑑𝑖𝑛𝑔
𝑛𝑒𝑤 𝑖𝑛𝑑𝑒𝑥 𝑎𝑑𝑑𝑖𝑡𝑖𝑜𝑛𝑠

𝑃𝑎𝑠𝑘,𝑡−1,𝑗 − 𝑃𝑏𝑖𝑑,𝑡−1,𝑗𝑚𝑣
𝑚𝑣∗ (𝑜𝑝𝑒𝑛𝑖𝑛𝑔 𝑤𝑡𝑗,𝑡− 𝑐𝑙𝑜𝑠𝑖𝑛𝑔 𝑤𝑡𝑗,𝑡−1) − − − (43)𝑃𝑏𝑖𝑑,𝑡−1,𝑗 + 𝐴𝑡−1,𝑗Where:
𝑎𝑠𝑘
𝑃𝑡−1,𝑗– Closing ask price of security j on one business day before the effective day ofrebalancing
𝑏𝑖𝑑𝑃𝑡−1,𝑗– Closing bid price of security j on one business day before the effective day ofrebalancing
𝑚𝑣
𝑜𝑝𝑒𝑛𝑖𝑛𝑔 𝑤𝑡𝑗,𝑡=𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝑀𝑉𝑡,𝑗𝑛∑𝑗=1 𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝑀𝑉𝑡,𝑗𝑚𝑣𝑐𝑙𝑜𝑠𝑖𝑛𝑔 𝑤𝑡𝑗,𝑡−1=

𝐴𝑑𝑗𝑢𝑠𝑡𝑒𝑑 𝑀𝑉𝑡−1,𝑗𝑛∑𝑗=1 𝐴𝑑𝑗𝑢𝑠𝑡𝑒𝑑 𝑀𝑉𝑡−1,𝑗𝐷𝑃𝑡−1,𝑗 ∗ 𝑁𝑡−1,𝑗 ∗ 𝐹𝑋𝑡−1,𝑗 ∗ 𝐾𝑡,𝑗
100
𝐷𝑃𝑡,𝑗 ∗ 𝑁𝑡,𝑗 ∗ 𝐹𝑋𝑡,𝑗 ∗ 𝐾𝑡,𝑗𝐴𝑑𝑗𝑢𝑠𝑡𝑒𝑑 𝑀𝑉𝑡,𝑗 =100
𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝑀𝑉𝑡,𝑗 =Therefore, index total return (Index TR) on the effective date of rebalancing is adjusted as follows.

𝑇𝐶
𝐼𝑛𝑑𝑒𝑥 𝑇𝑅𝑡=𝑠= 𝐼𝑛𝑑𝑒𝑥 𝑇𝑅𝑡=𝑠 − 𝐶𝑜𝑠𝑡 𝑡=𝑠

Where:
𝐼𝑛𝑑𝑒𝑥 𝑇𝑅𝑠𝑇𝐶 - Index total return adjusted for transaction cost on the effective date of rebalancing.

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MSCI FIXED INCOME INDEX CALCULATION METHODOLOGY | DECEMBER 2023

6.2

Credit Rating Scale
Moody’s

S&P

Score

MSCI

Aaa

AAA

0

AAA

Aa1

AA+

1

AA+

Aa2

AA

2

AA

Aa3

AA-

3

AA-

A1

A+

4

A+

A2

A

5

A

A3

A-

6

A-

Baa1

BBB+

7

BBB+

Baa2

BBB

8

BBB

Baa3

BBB-

9

BBB-

Ba1

BB+

10

BB+

Ba2

BB

11

BB

Ba3

BB-

12

BB-

B1

B+

13

B+

B2

B

14

B

B3

B-

15

B-

Caa1

CCC+

16

CCC+

Caa2

CCC

17

CCC

Caa3

CCC-

18

CCC-

Ca1

CC+

19

CC+

Ca2

CC

20

CC

Ca3

CC-

21

CC-

C1

C+

22

C+

C2

C

23

C

C3

C-

24

C-

D8

D

25

D

8 Average ratings methodology applies to defaulted assets too, and default events are reported individually in corporate action.

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MSCI FIXED INCOME INDEX CALCULATION METHODOLOGY | DECEMBER 2023

6.3

Treatment for Negative Accrued Interest
Accrued Interest is almost always expected to be positive, but bonds with a provision for ex-coupon
period can have negative accrued interest.
If a bond is purchased in the ex-coupon period, the buyer is not entitled to the upcoming coupon
payment. The buyer of such a bond thus incurs a loss of interest income for remainder of the excoupon period. This aspect is reflected accurately by negative accrued interest during that period.
Total return calculation framework for the MSCI Fixed Income Indexes accounts for this by adjusting
security calculation in the ex-coupon period based on when it was added to the index.
If a security was added to the index in the ex-coupon period, then it does not receive coupon
payment on the next coupon date (i.e., Cash from Coupon = 0). On the other hand, if a security isalready a part of the index portfolio when it enters the ex-coupon period, then accrued interest forthe security is adjusted for calculation purposes as shown below.
𝑒𝑥−𝑐𝑜𝑢𝑝𝑜𝑛

𝐴𝑡,𝑗

6.4

= 𝐴𝑡,𝑗 +𝐶𝑜𝑢𝑝𝑜𝑛𝑗 /100
𝐶𝑜𝑢𝑝𝑜𝑛 𝐹𝑟𝑒𝑞𝑢𝑒𝑛𝑐𝑦𝑗

Treatment of Missing Data and Usage of Alternate Sources
For index maintenance purposes, MSCI often uses data received from multiple sources. Such data
may need to be taken on specific and defined dates (‘Data Date’) as is relevant to a specific index
methodology. In certain instances, due to an extraordinary event or exceptional technical issue, dataneeded as of a Data Date may not be available as expected. In such cases, unless otherwise
specified in the relevant index methodology, MSCI will use the most recent data available prior to the
Data Date. MSCI will release a public announcement to inform clients about the occurrence of any
event where this methodological directive is enacted.
Additionally, MSCI independently monitors the quality of data from its data sources on an ongoingbasis. MSCI may under exceptional circumstances elect to use data from alternative sources if
MSCI determines that the primary source data is not reflective of market conditions. In suchcircumstances, and if deemed material, MSCI will release a public announcement to inform clients
about the change. All such determinations are made by the MSCI Fixed Income Index Committee(FIIC). If appropriate, MSCI may conduct a consultation with the investment community to gather
feedback on the most relevant alternate source.

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MSCI FIXED INCOME INDEX CALCULATION METHODOLOGY | DECEMBER 2023

6.5

Glossary of Terms
Glossary of Terms in the order of their appearance
𝑃 – Clean Bid Price of a security
𝐴 - Accrued Interest of a security
𝐷𝑃 - Dirty Price of a security
𝑁 - Amount Outstanding of a security
𝐾 – Security Inclusion Factor of a security
𝑀𝑉 – Market Value of a security
𝑀𝑉𝐶 – Market Value with Cash of a security
𝐶𝐶𝐵 - Total cumulative cash balance of a security
𝐶𝐶𝑃 - Cumulative cash from coupon payments of a security accrued since last rebalancing
𝐶𝐶𝑅 - Cumulative cash from principal redemption of a security since last rebalancing
𝐶𝑜𝑢𝑝𝑜𝑛 – Annual coupon rate of a security
𝐶𝑜𝑢𝑝𝑜𝑛 𝐹𝑟𝑒𝑞𝑢𝑒𝑛𝑐𝑦 – Coupon payment frequency of a security
𝑅𝑃 - Redemption Price of a security
𝐹𝑋 – Foreign exchange rate
𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝑀𝑉𝐶 – Market value inclusive of cash a security in the opening index portfolio
𝐴𝑑𝑗𝑢𝑠𝑡𝑒𝑑 𝑀𝑉𝐶 - Market value inclusive of cash for a security adjusted for changes in price,interest and / or principal
𝑆𝐿𝑇𝑅 – Security level Total Return
𝑆𝐿𝑃𝑅 – Security level Price Return
𝑆𝐿𝐼𝑅 – Security level Income Return
FXR – FX Return
Index TR – Index Total Return
Index PR – Index Price Return
Index IR – Index Income Return
𝑇𝑅𝐼 – Total Return Index Level
𝑃𝑅𝐼 – Price Return Index Level
𝐼𝑅𝐼 – Income Return Index Level© 2023 MSCI Inc. All rights reserved.

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MSCI FIXED INCOME INDEX CALCULATION METHODOLOGY | DECEMBER 2023

The following sections have been modified since August 2020:
Section MSCI Fixed Income Indexes: Referenced the MSCI Fixed Income Data methodology fordetails on holiday treatment.
The following sections have been modified since April 2022:
Section 1.3.1 – Security Level Price Return
Section 1.3.2 – Security Level Income Return
Section 1.4.1 – Index Level Total Return Attribution
Added Section 4.5 – Glossary of Terms
The following sections have been modified since December 2023:
Section 6.2 – Credit rating scale expanded to include all credit ratings till Default.

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MSCI FIXED INCOME INDEX CALCULATION METHODOLOGY | DECEMBER 2023

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