BBVA Credit Trend

Overview

The iTraxx and CDX Excess Return Indices represent the inherent market risk, default risk and illiquidity risk premium embedded in the underlying bonds.

These risk premiums can be captured via a long/short exposure on the High Yield and Investment Grade. The credit spreads tighten and widen in line with market cycles and liquidity conditions. Changes in the spread levels capture the changes in the economic conditions, and can be used to analyse trends.

BBVA Credit Trend Index aims to capture the trend risk premia generated by changing macro and micro economic conditions, by taking long/short positions in credit markets via itraxx and CDX Indices. It provides uncorrelated market returns, especially in risky environments; and it applies a forward looking indicator to capture sharp changes in the macroeconomic conditions. It is an efficient and transparent way to improve the sharpe ratio of a portfolio.

Key Metrics

Category

Alternative Risk Premia

Subcategory

Trend

Asset Class

Credit

Region

EU + US

Weighting

Equally risk weighted

# Constituents

iTraxx Main
iTraxx Xover
CDX NA HY
CDX NA IG

Key Facts

Long/short time series trend investment strategy with a forward looking indicator
Investment universe: four most liquid 5Y credit default swap indices: iTraxx Main, iTraxx Xover, CDX NA HY and CDX NA IG
Short and medium term technical indicators (1mi SMA, 3mo SMA) are used to determine trend and trigger Risk ON / NEUTRAL / OFF positions
Shock protection mechanism based on a forward looking volatility indicator

Disclaimer

DISCLAIMER IHS Markit

“The BBVA Credit Trend index (the “Index”) referenced herein is the property of Banco Bilbao Vizcaya Argentaria, S.A. (“BBVA” or “Index Owner”) and the Index is solely calculated, administered and published by IHS Markit Benchmark Administration Limited and/or its affiliates (“Index Administrator”). For the avoidance of doubt, BBVA does not act as an administrator or as a contributor of the Index. Each user and party acknowledges and agrees that the Index is not supported, endorsed or promoted by the Index Administrator or the Index Owner. Neither the Index Administrator nor the Index Owner make any representation whatsoever, whether express or implied, and hereby expressly disclaim all warranties (including, without limitation, those of merchantability or fitness for a particular purpose or use), with respect to the Index or any data included therein or relating thereto, and in particular disclaims any warranty either as to the quality, accuracy and/or completeness of the Index or any data included therein, the results obtained from the use of the Index and/or the composition of the Index at any particular time on any particular date or otherwise and/or the creditworthiness of any entity, or the likelihood of the occurrence of a credit event or similar event (however defined) with respect to an obligation, in the Index at any particular time on any particular date or otherwise. Neither the Index Administrator nor the Index Owner shall be liable (whether in negligence or otherwise) to the parties or any other person for any error in the Index, and they are under no obligation to advise the parties or any person of any error therein.

Neither the Index Administrator nor the Index Owner make any representation whatsoever, whether express or implied, as to the advisability of, the ability of the Index to track relevant markets’ performances, or otherwise relating to the Index or any transaction or product with respect thereto, or of assuming any risks in connection therewith. Neither the Index Administrator nor the Index Owner has no obligation to take the needs of any party into consideration in determining, composing or calculating the Index. Neither the Index Owner, nor the Index Administrator, shall have any liability to any party for any act or failure to act by the Index Administrator in connection with the determination, adjustment, calculation or maintenance of the Index.

For the avoidance of doubt, there is no corporate ownership relationship between the Index Administrator and the Index Owner, which are separate and independent companies.

DISCLAIMER S&P

The BBVA Credit Trend index (the “Derived Index”) is a product of Banco Bilbao Vizcaya Argentaria, S.A. (“Licensee”) and uses as a component thereof the Cboe Volatility Index® (VIX®), which is a product of S&P Dow Jones Indices LLC, its affiliates and/or third party licensors (“S&P DJI”) under license. S&P®, S&P 500®, US 500®, The 500®, iBoxx®, iTraxx®, and CDX® are registered trademarks of S&P Global Inc. or its affiliates (“S&P”), Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”), and VIX® and CBOE® are registered trademarks of Cboe Exchange, Inc. (“CBOE”). The trademarks have been licensed to S&P Dow Jones Indices and have been sublicensed for use for certain purposes by Licensee. The Derived Index is not owned, endorsed, or approved by or associated with S&P Dow Jones Indices. The Derived Index Product is not sponsored, endorsed, sold or promoted by S&P DJI, S&P, Dow Jones, CBOE and S&P DJI, S&P, Dow Jones and CBOE does not make any representation regarding the advisability of investing in the Derived Index Product.