A debut Commerzbank SME loan backed covered bond, the first of its kind from a major jurisdiction, is understood to have made it into Barclays Capital’s covered bond index, while a decision on the bonds’ inclusion in Markit iBoxx indices is expected this week.

Commerzbank sold a Eu500m five year SME loan-backed covered bond on Thursday, issuing the bonds outside Germany’s Pfandbrief legislative framework as this does not allow SME loans to serve as collateral for Pfandbriefe. The unprecedented characteristics of the bonds, which are not CRD or Ucits-compliant, has raised questions about whether they would be included in major euro market covered bond indices, which could affect their attractiveness to investors.

According to Florian Eichert, senior covered bond analyst at Crédit Agricole, Barclays has entered the Commerzbank issuance into its covered bond index, where it is the sole entry in an “Other Covered – Non-Pfandbriefe sector” sub-index.

The Markit iBoxx EUR Covered index is another major index in the covered bond industry, and, according to Eichert, the iBoxx European Technical Committee will this week decide on which index to allocate the Commerzbank SME backed issuance to, with the next index rebalancing at the end of February/beginning of March revealing the outcome.

iBoxx has an iBoxx EUR collateralised index that includes the iBoxx EUR Covered, iBoxx EUR securitised and iBoxx EUR Other Collateralised, noted Eichert, with the iBoxx EUR Covered the biggest one in that group and as such by far most important.

“The securitised index has a mere seven bonds in it with a total outstanding volume of Eu9.5bn while the other collateralised index has a whopping two bonds in it that make up Eu1.25bn,” he said.

Neither Barclays nor Markit were able to respond to enquiries by The CBR’s deadline.