Fitch Releases Analysis On New iTraxx Europe CDS Index

LONDON--July 12, 2004--Fitch Ratings, the international rating agency, announced today that it initiated coverage of the new iTraxx Europe credit default swap (CDS) index. Consisting of 125 reference entities, the iTraxx Europe CDS index allows investors to gain exposure to various tranches of a diversified portfolio of the most liquid investment grade European corporate reference entities. Monthly credit assessments of various risk tranches and supporting analytics are available exclusively on Fitch's credit derivatives web site, 'www.fitchcdx.com'.

The current iTraxx index replaces the DJ TRAC-X Europe 100 (TRAC-X) and iBoxx Diversified (iBoxx) indices. 'The merger of the two competing indices benefits investors by creating one standard trading platform for the European corporate CDS index,' said Benjamin Accam, Associate Director, Fitch Ratings. 'This merger eliminated any discrepancies that arose due to the differences between the iBoxx and TRAC-X indices.'

The iTraxx CDS index is based on 125 reference entities compared to 100 each in iBoxx/TRAC-X. 21 new reference entities (in neither iBoxx nor TRAC-X) were included in iTraxx and 28 and fourteen reference entities that were respectively in iBoxx and TRAC-X have been excluded from iTraxx. Credit events for iTraxx include bankruptcy, failure to pay, and restructuring, as in the prior indices. The contracts under the iTraxx index began trading at the end of June.

The credit risk of the iTraxx index is similar to that of the iBoxx and TRAC-X indices. Furthermore, the iTraxx Fitch Portfolio Correlation Level (PCL) of 0.21 is consistent with the PCLs of iBoxx and TRAC-X at 0.21 and 0.23, respectively, and the same weighted average rating of 'A-/BBB+' has been maintained in the iTraxx pool as in iBoxx and TRAC-X pools.

The top three industry concentrations in iTraxx are: Banking & Finance (20.80%), Utilities (12.80%) and Telecommunications (8.80%). In comparison, the top three concentrations (average) of the previous indices iBoxx/TRAC-X were: Banking & Finance (20%), Telecommunications (10.50%) and Automobiles (7%). Business Services -- which had 1% concentration in both TRAC-X and iBoxx -- has been excluded as an industry.

The top three country concentrations in iTraxx are: United Kingdom (32%), Germany (17.60%) and France (16.80%). Again in comparison, the top three (average) concentrations of iBoxx/TRAC-X were: United Kingdom (27.50%), France (20.50%) and Germany (18.50%). No Belgian and Norwegian reference entities are currently included (Belgium had a 2% concentration in iBoxx, Norway had 1% concentration in TRAC-X and iBoxx).

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FitchCDx.com users can access the iTraxx analytics under Index Analytics.