Consultation on the
MSCI Corporate Bond
Indexes Methodology
INDEX METHODOLOGY CHANGE PROPOSAL
This 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 specificallyrequested by specific market participants. In that case, the relevant feedback would be published together with the result of
the consultation.

November 2023

Information Classification: GENERAL© 2023 MSCI Inc. All rights reserved.
Please refer to the disclaimer at the end of this document.

Executive Summary• The MSCI Corporate Bond Indexes are constructed to measure the performance of eligible
corporate bonds issued in certain credit markets.
• MSCI proposes the following updates to the existing methodology to further enhance thereplicability of the MSCI Corporate Bond Indexes :– Introducing a liquidity screen based on the MarketAxess Relative Liquidity Score data to
exclude illiquid bonds from the indexes.
– Implementing an issuer ticker cap to guard against issuer concentration risk in the MSCI
Corporate Bond Indexes.
– Introducing a 12-month lock-out period for index deletions to reduce reverse turnover in theindexes.
• MSCI welcomes feedback from market participants until January 15, 2024, and will announce theresults of the consultation by end of January 2024.

Information Classification: GENERALMethodology Proposal – MSCI Corporate Bond Indexes
Inclusion criteria

Current Methodology

Proposed Methodology Changes

Issuer Country of Domicile

Developed Markets

Developed Markets

Issuer type

Corporate debt only

Corporate debt only

Min time to maturity

1 year for current bond constituents,
1.5 years for new entrants

1 year for current bond constituents,
1.5 years for new entrants

Size screen

USD Core IG – 750m, USD HY – 200m
EUR IG – 300m, USD HY – 150m
GBP IG – 200m, GBP HY – 100m

USD Core IG – 750m, USD HY – 200m
EUR IG – 300m, USD HY – 150m
GBP IG – 200m, GBP HY – 100m

Lock out period-

12 months

Liquidity Screen-

Liquidity Score* > 1
No Liquidity Screen for the MSCI CAD Corporate Bond Indexes.

Security Weighting

Market Cap Weighted

Market Cap Weighted with Issuer cap

Issuer Capping-

Capping of 3%(5% for MSCI CAD IG Corporate Bond Index; No Capping for the MSCI GBP HY & CAD HY Corporate Bond
Indexes)

RatingMin Moody’s / S&P rating: Baa3 / BBB-Min Moody’s / S&P rating: Baa3 / BBB-

Rebalancing

MonthlyMonthly

Pricing source

Refinitiv as primary source and ICE as secondary

Refinitiv as primary source and ICE as secondary*Simple average of MarketAxess Relative Liquidity Score calculated over a 21-day rolling window.
Information Classification: GENERAL

Simulated impact of including the liquidity screen (1/2)
Index NameUSD IG Core

USD HYEUR IGEUR HY

GBP IG

GBP HY

3760

2029

3310

568

819

81

Alternative 1 – Exclude Liquidity Score = 03743 (-0.5%)

2006 (1.1%)

3241 (-2.1%)

565 (-0.5%)810 (-1.1%)

80 (1.2%)

Alternative 2 – Exclude Liquidity Score <= 13740 (-0.5%)

1921 (-5.3%)

3188 (-3.7%)554 (-2.5%)803 (-2.0%)

78 (-3.7%)

Alternative 3 – Exclude Liquidity Score <= 23718 (-1.1%)

1723 (-15.1%)

3073 (-7.2%)

532 (-6.3%)

795 (-2.9%)

71 (-12.3%)

100.0

100.0

100.0

100.0

100.0

100.0

Alternative 1 – Exclude Liquidity Score = 099.7 (-0.3%)

99.3 (-0.7%)

98.4 (-1.6%)

99.8 (-0.2%)

98.8 (-1.2%)

98.9 (-1.1%)

Alternative 2 – Exclude Liquidity Score <= 1

99.6 (-0.4%)

97.4 (-2.6%)

97.5 (-2.5%)

98.9 (-1.1%)

98.3 (-1.7%)

97.7 (-2.3%)

Alternative 3 – Exclude Liquidity Score <= 2

99.3 (-0.7%)

92.5 (-7.5%)

95.5 (-4.5%)

97.0 (-3.0%)

97.8 (-2.2%)

93.1 (-6.9%)

6.93

5.31

6.73

6.03

6.76

5.97

Alternative 1 – Exclude Liquidity Score = 0

7.48 (8%)

6.46 (22%)

7.39 (10%)

6.70 (11%)

7.40 (9%)

6.75 (13%)

Alternative 2 – Exclude Liquidity Score <= 1

7.49 (8%)

6.56 (24%)

7.45 (11%)

6.75 (12%)

7.43 (10%)

6.82 (14%)

Alternative 3 – Exclude Liquidity Score <= 2

7.50 (8%)

6.83 (29%)

7.57 (12%)

6.85 (14%)

7.46 (10%)

7.08 (19%)

Number of Constituents
Current

Market Value Coverage (%)
Current

Average RLS Score
Current

Data as of September 1st, 2023; .
Information Classification: GENERAL

Simulated impact of including the liquidity screen (2/2)
Index NameUSD IG Core

USD HYEUR IGEUR HY

GBP IG

GBP HY

495

916

603

286

275

51

Alternative 1 –Exclude Liquidity Score = 0494 (-0.2%)

902 (-1.5%)603

285 (-0.3%)274 (-0.4%)

50 (-2.0%)

Alternative 2 – Exclude Liquidity Score <= 1

493 (-0.4%)845 (-7.8%)

597 (-1.0%)277 (-3.1%)

269 (-2.2%)

48 (-5.9%)

Alternative 3 – Exclude Liquidity Score <= 2

486 (-1.8%)740 (-19.2%)

579 (-4.0%)

265 (-7.3%)

265 (-3.6%)

43 (-15.7%)

3.52

5.08

2.59

3.11

1.97

9.25

Alternative 1 –Exclude Liquidity Score = 0

3.54 (0.6%)

5.12 (0.8%)

1.83 (-29.3%)

3.12 (0.3%)

1.95 (-1.0%)

9.36 (1.2%)

Alternative 2 – Exclude Liquidity Score <= 1

3.54 (0.6%)

5.22 (2.8%)

1.85 (-28.6%)

3.15 (1.3%)

1.96 (-0.5%)

9.47 (2.4%)

Alternative 3 – Exclude Liquidity Score <= 2

3.55 (0.9%)

5.50 (8.3%)

1.87 (-27.8%)

3.21 (3.2%)

1.97

9.94 (7.5%)

3

3

3

3

3

-

Number of Issuer Tickers
Current

Maximum Ticker Weight (%)
Current

Proposed Issuer Ticker Weight Cap (%)

Data as of September 1st, 2023;
Information Classification: GENERAL

Simulated Impact of including the issuer ticker cap - Top 5
Issuer Tickers by Weight (1/2)
Maximum Ticker Weight (%)

USD IG Core

USD HY

Maximum Issuer Ticker Weight

3.54

5.22

# of Issuer Tickers

493

845

Proposed Issuer Weight Cap (%)

33

USD IG Core

USD HY

Issuer Ticker

Issuer Name

Current

BAC

Bank of America

3.54

JPM

JPMorgan Chase & Co

3.10

MS

Morgan Stanley

2.46

WFC

Wells Fargo & Co

2.26

C

Citi Group Inc

2.02

Proposal
3.00(-15.3%)3.00(-3.2%)

2.47(0.4%)

2.27(0.4%)

2.04(1.0%)

Issuer Ticker

Issuer Name

Current

CHTR

Charter Communications
Operating LLC

5.22

F

Ford Motor Company

3.02

OXY

Occidental Petroleum Corp

1.14

CNC

Centene Corp

1.07

TDG

Transdigm Inc

1.00

Data as of September 1st, 2023.
Information Classification: GENERAL

Proposal
3.00(-42.5%)3.00(-0.7%)

1.17(2.6%)

1.09(1.9%)

1.02(2.0%)

Simulated Impact of including the issuer ticker cap - Top 5
Issuer Tickers by Weight (2/2)
Maximum Ticker Weight (%)

EUR IGEUR HY

GBP IG

GBP HYCAD IGCAD HY

Maximum Issuer Ticker Weight

1.85

3.15

1.96

9.47

9.18

11.04

# of Issuer Tickers

597

277

269

48

117

29

Proposed Issuer Weight Cap (%)

3

3

3

-

5

-

No Capping for the MSCI CAD HY Corporate Bond Index and MSCI GBP HY Corporate Bond Index due to the concentrated nature of the universe.

EUR HYCAD IG

Issuer Ticker

Issuer Name

Current

TLIT

Telecom Italia SPA

3.15

CLNX

Cellnex Telecom SA

2.66

TEVA

TEVA Pharmaceutical
Finance Netherlands

2.18

BAMI

Banco BPM SPA

2.07

FRVIA

Forvia SE

1.89

ProposalIssuer Ticker

Issuer Name

Current

3.00

TD

Toronto Dominion Bank

9.18

RY

Royal Bank of Canada

8.22

ENB

Enbridge Inc

7.24

2.07

BMO

Bank of Montreal

6.40

1.89

BCE

Bell Telephone
Company of Canada

4.77(-4.8%)

2.67(0.4%)

2.19(0.5%)

Data as of September 1st, 2023.
Information Classification: GENERAL

Proposal
5.00(-45.5%)5.00(-39.2%)

5.00(-30.9%)5.00(-21.9%)5.00(4.8%)

Simulated Turnover Impact of including a Lock-Out Period
On average, including a 12-month lock-out period lowers the turnover across indexes
Index

USD IG CoreEUR IG

GBP IG

Rebalancing Turnover

PreLock-Out

PostLock-Out

Lock-out
ImpactPreLock-Out

PostLock-Out

Lock-out
ImpactPreLock-Out

PostLock-Out

Lock-out
ImpactFebruary 2023

2.24%

2.20%

-0.04%

3.09%

2.83%

-0.26%

2.49%

2.49%

0.00%

March 2023

1.79%

1.68%

-0.10%

1.83%

1.60%

-0.24%

3.02%

3.01%

-0.01%

April 2023

2.60%

2.50%

-0.10%

2.55%

2.07%

-0.48%

3.26%

1.32%

-1.94%

May 2023

1.26%

1.18%

-0.08%

1.84%

1.55%

-0.29%

1.15%

0.96%

-0.19%

June 2023

3.43%

3.36%

-0.07%

3.20%

3.05%

-0.15%

1.93%

1.91%

-0.02%

July 2023

2.23%

2.00%

-0.23%

2.57%

2.35%

-0.22%

2.14%

2.19%

0.05%

August 2023

1.41%

1.38%

-0.04%

1.59%

1.49%

-0.10%

1.15%

1.15%

0.01%

September 2023

1.73%

1.61%

-0.12%

0.97%

0.54%

-0.43%

1.25%

1.24%

-0.01%

October 2023

1.57%

1.55%

-0.02%

2.64%

2.13%

-0.50%

1.74%

1.75%

0.01%

Average Turnover Impact ofincluding Lockout

USD IG Core

-0.09%

Turnover data based on historical simulations
Information Classification: GENERAL-0.30%-0.23%

Consultation Questions
Liquidity Screen• With a view to balance liquidity and representativeness of the index, the proposal is to only screen out bonds that have aliquidity score of less than or equal to one:
– Do you agree with the proposed liquidity screen? If not, then do you prefer Alternative 1 or Alternative 3?
Issuer Capping• Do you agree with the implementation of a new methodology rule to include a 3% issuer ticker cap in the GBP IG, USD &EUR Corporate Bond Indexes?

• Do you agree with the implementation of 5% issuer ticker cap in the MSCI CAD IG Corporate Bond Index Methodology?
• Do you agree with not applying capping on MSCI GBP HY Corporate Bond Index and MSCI CAD HY Corporate Bond Index?
Lock-Out Period• Do you agree with the addition of a 12-month lock out period for index deletions to control for reverse turnover?

Information Classification: GENERALAbout MSCIMSCI is a leading provider of critical decision support tools and services for the global
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Information Classification: GENERAL

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