Merrill Unveils Swap Index Series

April 18, 2007 ( - Merrill Lynch & Co., Inc. announced the development of a new inflation-linked swap index series designed to track the performance of sterling and euro inflation-linked interest rate swaps.

A news release said the new indices, which are an extension of Merrill Lynch’s swap index lineup, cover key points along the curve, including: two-, five-, 10-, 15-, 20-, 25-, 30-, 35-, 40-, 45- and 50-year maturities. 

“The new inflation-linked swap indices, along with our nominal swap indices and our nominal and inflation-linked bond indices, are essential building blocks for constructing relevant benchmarks to measure pension plan investment performance,” said Phil Galdi, managing director of the firm’s global bond index & analytics group, in the news release.  “With this development we are able to construct custom indices, emulating a pension plan’s inflation and non-inflation sensitive liabilities, comprised of a fixed constituent list of nominal and/or inflation-linked swaps and bonds that roll out of the index on any defined schedule or as they mature.”

Two types of inflation-linked swap indices are compiled. The “real coupon swap indices” provide the return profile of a fixed real coupon bond plus the actual rate of inflation over the period by combining a nominal zero swap and an inflation swap, according to the news release.  Alternatively, the pure “inflation swap indices” isolate the inflation factor by investing in an inflation swap without the nominal zero swap component. 

The inflation-linked and nominal swap indices are compiled daily and are available, along with Merrill Lynch’s entire compliment of over 3,000 bond indices, on a wide variety of distribution platforms.