Consultation Proposals
1) ELIGIBILITY OF EU BONDS IN MSCI GOVERNMENTBOND INDEXES
2) SHIFTING THE PRIMARY PRICING PROVIDER FOR
MSCI’S SUITE OF INDEXESThis consultation may or may not lead to the implementation of any or all of the proposed changes in the highlighted
or any other MSCI indexes. Consultation feedback will remain confidential. MSCI may publicly disclose feedback if
specifically requested by specific market participants. In that case, the relevant feedback would be published together
with the result of the consultation

May 2024
Information Classification: GENERAL

Question: Should EU Bonds be
eligible for inclusion within the
MSCI Government Bond Indexes?

Information Classification: GENERALThe EU: A unique union of sovereign states
The European Union (EU) is an economic and political union of 27 sovereign Member States, defined bya unique institutional structure unlike a typical supranational entity, which has the following
characteristics:
Decision-making capacity inareas where member states
have transferred theirsovereignty to the EU.

Power to establish, implement
and enforce EU laws in certain
areas.

Distinct legal personality,
participating in international
forums like the WTO and the UN.

Common currency for theEurozone and an independent
Central Bank.

Common budget to finance EU
policy priorities and back EU
debt issuance (unlike a typicalsupranational with debt backed
by pooled or committed capital).

Empowered by the EU Treaties
to borrow from international
capital markets on behalf of theEuropean Union.

Information retrieved from the EU Investor’s Presentation.
Information Classification: GENERALThe EU Commission bonds are rated nearly AAA by every
rating agency

AgencyEU Credit
RatingAAA / F1+
Outlook stable

Aaa / (P) P-1
Outlook stable

AA+ / A-1 +Outlook stable* Unsolicited rating

Information retrieved from the EU Investor’s Presentation.
Information Classification: GENERAL

AAA / S-1 +Outlook stable

AAA* / R-1(high)*
Outlook stable

Evolution of EU debt issuances: There is a significant
increase in bond supply since the Covid-19 pandemic

Information retrieved from the EU Investor’s Presentation.
Information Classification: GENERALEU Bonds: A pillar of EU funding
EU Issuances: A liquid curve of EU benchmark bonds• Regular issuance of liquid benchmark
bonds from 3 to 30 years.
• Conventional and green bonds via
issues or taps.
• Expected total volume and issuanceweeks announced in 6-monthly fundingplans.

• Bond issuances via syndicatedtransactions and auctions.

Information retrieved from the EU Investor’s Presentation.
Information Classification: GENERALEU bond yield curve compared to German and Frenchgovernment bonds
Yield curves of the EU, French and German bonds (as of April 2024)
4

3.5

3

2.5

2

1.5
2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

2035

2036

2037
EU

2038
France

2039

2040

2041

2042

2043

Germany

Simulated based on data on April 3rd, 2024, as of the May 2024 Fixed Income Index Rebalance.
Information Classification: GENERAL

2044

2045

2046

2047

2048

2049

2050

2051

2052

Simulated Impact ofincluding eligible EU Bonds
to MSCI’s Suite of Indexes

Information Classification: GENERAL

Impact of including eligible EU bonds in MSCI’s Eurozone
Government Bond Index• The European Union is currently classified as a Supranational entity.
• Index eligible EU bond totals approximately EUR 467 billion, resulting inapproximately 5% weight in the MSCI Eurozone Government Bond Index.

% Market Value Weight in the Index by Country
23.10%• The weighted average curve yield is 3.04% and a duration of 9.47.
MSCI Eurozone
Government Bond Index

MSCI Eurozone Government Bond Index(incl. EU bonds)

Duration

7.26

7.35

Yield

3.04

3.04

Time To Maturity

9.49

9.68

Coupon2.02

1.99# of Bonds

423

473

EUR 7.6 trillion

EUR 8.1 trillion

Weight of EU Bonds Added

-

5.40%

# of EU Bonds Added-

50

Total Debt Outstanding

21.90%

17.90%

13.40%

5.40%

5.10%

4.30%

3.40%
2.00%

Simulated based on data on April 3rd, 2024, for the May 2024 Fixed Income Index Rebalance.
Information Classification: GENERAL

1.50%

1.50%

0.60%

If included, EU Bonds would represent approximately 1.5% in
MSCI’s Developed Market Government Bond Index (MGBI-DM)• The European Union is currently classified as a Supranational entity.
• If EU bonds issuers are included in the MSCI Government Bond IndexDeveloped Markets Government Bond Index, then we note that 50 new
bonds would enter with a weight of ~1.5%.

% Market Value Weight in the Index by Country
44.06%• These 50 fix-coupon paying bonds represent a debt stock of ~EUR 467
billion and the issuer is domiciled in Belgium.
• These bonds have an average yield of 3.04% and an average durationof 9.47.

Duration
Yield

7.31
3.37

MGBI-DM(incl. EU bonds)
7.34
3.36

Time To Maturity

9.75

9.85

Coupon# of Bonds

2.12
1192

2.11
1242

MGBI-DM

Total Debt Outstanding

EUR 31.3 trillion

EUR 31.8 trillion

Weight of EU Bonds Added

-

1.40%

# of EU Bonds Added-

50

19.73%

5.97%

USA

Japan

Simulated based on data on April 3rd, 2024, for the May 2024 Fixed
Income Index Rebalance.
Information Classification: GENERALFrance

5.77%

UnitedKingdom

7.48%
5.67%

Italy

4.62%

Germany

3.46%

Spain

1.84%

1.40%

CanadaEuropean
Union*Australia, Austria, Belgium, Denmark, Finland, Ireland, Israel, Netherlands, Norway,
Portugal, Singapore, Slovakia, Sweden, Switzerland

Others*Requesting Feedback:

Information Classification: GENERALEU Bond Eligibility Questions• Should EU Bonds be eligible for inclusion in the MSCI Government Bond Indexes?
• If yes, when should the bonds be eligible for inclusion within the indexes– September, October or November month-end rebalancing• If eligible, should the bonds get included in a phased approach?
A.

No need to phase in the bonds and the preference would be to include all at once.

B.

Ideally, the bonds would be included over two months.

C.

Due to the eligible debt stock of approximately EUR 467 billion, the preference would be to include over a 3-month period.

• Presently EU Bonds are classified as Supra-National
A.

Should the EU bonds continue to be classified as Supra-National?

B.

The EU Commission is domiciled in Belgium. Should the country of risk for the EU bonds transition to Belgium?

MSCI welcomes feedback from market participants until 24th May 2024 and will announce the results of the consultation by end of May 2024.

Information Classification: GENERAL

Question: Are there any reservations in
shifting the primary pricing provider of
MSCI’s Fixed Income suite of Indexes?

Information Classification: GENERAL

Vendor 1 is the primary pricing provider for MSCI’s suite of indexes.
The coverage universe is similar across both vendors
Index name

Number of
constituents

USD IG Corporate7625

USD HY Corporate

2064

EUR IG Corporate

3448

EUR HY Corporate

587

GBP IG Corporate

824

Emerging Market Sovereigns (MESBI)

824

Government Bonds – Developed Markets (MGBIDM)

1197

Vendor 1’s coverage(Primary)(By Number of Constituents)

Information Classification: GENERAL

Vendor 2’s coverage(Secondary)(By Number of Constituents)

7624

7625

[99.99%][100.00%]

2062

2064

[99.90%][100.00%]

3448

3435

[100.00%][99.62%]587

587[100.00%][100.00%]

823

822

[99.88%][99.76%]824

824[100.00%][100.00%]

1180

1192

[98.58%][99.58%]

However, we observe fewer stale bond valuations utilizing
Vendor 2 pricing
USD HY constituents, stale bonds count

USD Core IG constituents, stale bonds countVendor 1
Vendor 2

USD HY SRI constituents, stale bonds count

USD IG constituents, stale bonds count*Based on respective index constituent data in the period between December 2022 to February 2023
Information Classification: GENERAL

Daily prices from Vendor 2 are closer aligned to the overallmarketInvestment Grade Bonds: mean bid-ask spreads
Vendor 1
Vendor 2

Information Classification: GENERAL

Source: fix.mfi_asset_analytics_ms (EJV) and idc.idc_cep_Price (IDC, filespec 3PM_NY)Requesting Feedback:

Information Classification: GENERAL

Pricing Provider Questions
MSCI Fixed Income Indexes are currently utilizing Vendor 1 as the primary source whereas Vendor 2 is used as
the secondary source.
– Proposal is to switch the primary pricing source to Vendor 2 and transition Vendor 1 as the secondary
pricing source.
• Would you agree or disagree with the decision?
– All bonds will be impacted from this proposal except CAD denominated bonds where Vendor 1 will continue
to be the primary pricing provider.
– In addition to the shift of our primary pricing provider, we propose to shift the capture time to 4:00 PM ESTfrom 3:00 PM EST for USD and CAD denominated bonds. This move would bring the price captures in linewith our snap times for our EMEA and APAC indices.
MSCI welcomes feedback from market participants until 24th May 2024 and will announce the results of the consultation by end of May 2024.

Information Classification: GENERAL

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Information Classification: GENERAL

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Information Classification: GENERAL

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