New iTraxx Australia Series 26 finalised

The constituent companies for the iTraxx Series 26 have been announced. YieldReport readers will recall that the iTraxx credit default index is reviewed every March and September with a new series replacing the old. The Series 26 Australian iTraxx index has no changes and has begun trading.

The iTraxx ‘roll’

The iTraxx credit default swap indices were developed in order to bring more liquidity and transparency to the credit default swap market. The indices are tradable instruments in their own right, with pre-determined fixed rates and the prices set by market demand.

The constituents of the indices are changed every six months on 20 March and 20 September in a process known as ‘rolling’ the index.  The roll occurs to ensure that the current series tracks the most liquid instruments in the relevant market.

Official pricing is collected by Markit on a daily basis by polling the trading desks at banks that are licensed market makers. The most liquid indices also have a weekly Tradable Fixing calculated in a similar fashion to the Libor fixings process. The tradable fixing is often used as a reference price for calculating payments of other structured credit instruments. At present trading in iTraxx CDS contracts predominantly occurs in the over-the-counter market.

For a fuller explanation of the iTraxx index read What is iTraxx?