New index for secondary market yields: UDRB to replace SMR from April 1, 2015(, Vienna)
As of the end of March 2015, the Oesterreichische Kontrollbank AG (OeKB) will stop calculating and publishing the indices for secondary market yields in Austria (SMR). The index that is to legally replace the SMR – the average government bond yields weighted by outstanding amounts (UDRB) will be calculated and published by the Oesterreichische Nationalbank (OeNB) from April 1, 2015. Using more current data and an updated method of calculation, the OeNB will provide the market with a transparent, transaction-based representative index.
The indices for secondary market yields (SMR) calculated by the OeKB were widely used as reference interest rates for saving, investment and credit products for many decades. They were published broken down by groups of issuers. Due to upcoming regulatory changes (adoption of an EU regulation on benchmark indices), the OeKB no longer calculates the SMR as from March 31, 2015. From April 2015, the OeNB will calculate and publish the average government bond yields weighted by outstanding amounts (UDRB), which will replace the SMR.
UDRB replaces SMR in existing and new contracts
The SMR indices will no longer be used as reference interest rates in new contracts concluded from April 2015 on. In contracts concluded up to
March 31, 2015, that use SMR indices as reference interest rates, the SMR must be replaced by the UDRB unless the contracting partners have agreed or agree otherwise. The SMR index for “domestic bank” issuances is exempt from this change; the OeKB will continue to make it available until the end of June 2015. A replacement for the SMR index for domestic bank issuances has not been provided for by law. This implies that any replacement must be agreed upon individually by the contracting partners.
The transition from SMR to UDRB is set out in the federal law on the determination of weighted average yields on government bonds. According to the UDRBG, the UDRB will succeed the SMR index “central government”, “domestic issuers” and “domestic nonbanks” as well as “issuers total”.
Starting on April 10, 2015, the OeNB will publish on its website every Friday the UDRB trading day figures of the previous week. For additional information, see: http://www.oenb.at/en/Statistics/Standardized-Tables/interest-rates-and-exchange-rates/austrian-government-bond-yields.html
Background information: how the UDRB is calculated
As defined in the relevant law, the average government bond yields weighted by outstanding amounts (UDRB), is the average yield of outstanding euro-denominated Austrian government bonds issued under Austrian law with a fixed coupon and a remaining maturity of more than one year.
The data underlying the UDRB are more comprehensive than those underlying the SMR: The SMR index for issuances by the central government included only transactions with Austrian government bonds on the Vienna stock exchange. Since the volume of these transactions has been very low, the SMR to some extent reflected significantly lagged prices. The UDRB, by contrast, is based on data covering EU-wide stock exchange and over-the-counter transactions. The Austrian Federal Market Authority (FMA) makes this set of reporting data available to the OeNB in anonymized form.
The OeNB applies an established market method (“yield to maturity”) to calculate the UDRB. Thanks to its comprehensive underlying data, the high data quality and the reliable method of calculation, the UDRB is a representative indicator of the yield of Austrian government bonds.
For additional information on the methodology: http://www.oenb.at/en/Statistics/Standardized-Tables/interest-rates-and-exchange-rates/austrian-government-bond-yields/udrb-information-on-the-method-of-calculation-.html