|Return type||Total Return|
The SGI Bond USD is a range of indices designed to track the performance of hypothetical bonds that pay coupons semiannually and principal at maturity. Unlike standard bond indices, SGI Bond USD Indices seek to replicate the exposure to bonds through derivative instruments. To maintain constant maturity, the Indices are rolled-over on a monthly basis and reinvested at the corresponding swap rate to match the targeted duration.
The Indices are calculated on each business day (each, a Calculation Date) and attempt to replicate bond performance through the use of certain LIBOR-based swap and deposit fixing rates. No bonds actually underlie the Indices.
The relevant interest rate or Coupon Rate on the Hypothetical Bond is determined on the first Calculation Date of each month (each, a Roll Date) as the mid-market swap fixing rate at which financial institutions could obtain fixed semiannual payments in U.S. Dollars in exchange for floating rate payments at 3-Month USD LIBOR. Once a Coupon Rate has been established, the Index Sponsor calculates the Index level on each Calculation Date during the relevant month using two references: the Coupon Rate for the Hypothetical Bond and the Index level on the previous Roll Date. The Index methodology employs an algorithm to approximate the present value of the accrued coupon on the Hypothetical Bond and the change in the mark-to-market value of the Hypothetical Bond.
The Index level is adjusted upward or downward on each Calculation Date to account for these changes. These changes may be positive or negative and, as such, the Index level will fluctuate.