Credit Suisse First Boston is beginning to treat crossover credits as a distinct asset class and accordingly has launched a crossover index. It appears to be the first of its kind, according to index professionals at other firms. The benchmark will cover so-called five-B credits, which are rated triple-B by one agency and double-B by another, as well as fallen angels and some of the highest-rated junk bonds.
Baldwin Smith, head of the fixed-income index team at CSFB, said the index will allow investors to better compare the burgeoning crossover market to high-grade and high-yield sectors. "There's been so much interest in the crossover area, not only from the increase in the number of credits falling into that category, but also from the increased bid for yield," Smith said. "People know the names, are comfortable with them and can pick up more yield," he added.
The index is comprised of bonds with a minimum remaining face amount of $200 million and at least one below investment-grade rating from Moody's Investors Service or Standard & Poor's.
CSFB is also planning a European crossover index, which will have a similar model yet fewer bonds because the European market is smaller than the U.S. one.
