Moscow Exchange to update methodology for calculating bond yields on Dec 8

MOSCOW. Nov 19 (Interfax) - The Moscow Exchange plans to update the methodology for calculating bond yields starting on December 8, and begin publishing the z-spread to the curve of the benchmark RUONIA rate for overnight loans, the exchange said.

The amendments reflect the needs of professional market participants and investors regarding the emergence and active development of new types of debt instruments, specifically unknown amounts of future coupon payments and conditions for early redemption of bonds, according to the press release. The new approach to calculating yield indicators should render the Russian debt market more transparent, improve the quality of analytical coverage, and render the market more accessible to all types of investors, the exchange said.

The changes also specifically envisage transitioning to calculating the effective yield to maturity for discount bonds and all bonds in the final coupon period. Unknown coupons will be forecast based on money market forward rates for floating rate bonds. In contrast, the yield on perpetual bonds will be calculated using the current yield formula, which is the effective yield formula, taking into account only the current coupon payment.

A new indicator, the z-spread, is being added for fixed- and floating-rate bonds, as calculated using the RUONIA discount curve for standardized derivatives. The new indicator reflects the premium or discount of a given bond relative to expected benchmark rates.

The changes to the indicator calculation result from collaboration between the exchange and bond market experts, with the participation of the Fixed Income Securities Committee and the Bondholders Association, the exchange said.

The Bondholders Association notes that transitioning to calculating the effective yield to maturity for discount bonds and classic issues in the final coupon period will enable consistent comparison of bonds with fixed coupons.

"There is an important change for floaters. Future coupons for calculating yield to maturity will be estimated using forward money market rates, rendering the indicator more relevant to average market expectations," the association posted on its Telegram channel.