UDRB – information on the method of calculation
What is the UDRB?
The index "average government bond yields weighted by outstanding amounts," referred to by its German abbreviation UDRB (for "Umlaufgewichtete Durchschnittsrendite für Bundesanleihen") depicts the average yield of outstanding euro-denominated Austrian central government bonds issued under Austrian law with a fixed coupon and a remaining maturity of more than one year. The UDRB thus reflects the yield of Austrian central government bonds in the secondary market, serving as a capital market interest rate in addition to the short-term money market interest rate.
What is the legal basis of the UDRB?
The federal act on the determination of weighted average yields on government bonds (German abbreviation: UDRBG) prescribes that the Oesterreichische Nationalbank (OeNB) must calculate and publish the UDRB starting from April 2015. The UDRB hence replaces the SMR (secondary market yield) indices, i.e. the SMR "central government" (SMR Bund), the SMR "domestic issuers" (SMR Inländische Emittenten), the SMR "domestic nonbanks" (SMR Inländische Nichtbanken) and the SMR "issuers total" (Emittenten Gesamt), as the reference interest rates for legal acts and contracts.
What are the methodological differences between the UDRB and the SMR?
The differences between the UDRB and the SMR lie in the underlying data – which are more comprehensive for the UDRB – and the method of calculation. While the SMR Bund included only transactions with Austrian central government bonds on the Vienna stock exchange, the UDRB is based on data covering stock exchange and over-the-counter transactions that EU financial institutions are required to report to the competent supervisory authority. The Austrian Financial Market Authority (FMA) makes these data available to the OeNB in anonymized form. The OeNB applies the established market method ("yield to maturity") to calculate the UDRB. Thanks to its comprehensive underlying data, the high quality of the data used and the reliable method of calculation, the UDRB is a representative indicator of the yield of Austrian central government bonds.
What are the limits to the applicability of the UDRB?
It is important to note that like its predecessor, the SMR, the UDRB depicts the average yield of bonds with various residual maturities weighted by outstanding amounts. The index value therefore also depends on the structure of the residual maturities of the bonds included in the index. For this reason, caution is warranted when using the UDRB as a reference rate for financial contracts with a fixed maturity. Furthermore, it is not advisable to use the UDRB as a reference rate for marketable financial instruments since the UDRB's design as an average yield makes hedging impossible. Therefore, the UDRB is not suited to be used as a performance benchmark either.
Where is the UDRB published?
Every Friday, the UDRB trading day values of the previous week are published on the OeNB’s website. Period averages are published upon publication of the last daily UDRB value of the respective period.