Standard & Poor’s (S&P) has launched a eurozone government bond index which will measure the performance of the developed European Union government bond market.

The index is made up of bonds issued by all those countries within the eurozone which are considered developed markets under Bank of International Settlements classifications.

Italy and Germany currently represent 45.1% of the €3.8 trillion total market value of debt in the index, which is market-value weighted.

"The eurozone government bond market is a bit smaller than the US Treasury market, but much more complex principally because there are 16 separate issuers and likely to be more in the future," said S&P Indices vice president James Rieger.

"We often see debt from the smaller countries trading at spreads above the largest, more liquid issuers. Many investors are keen to capture the yield potential of the eurozone in its entirety. Others focus on the most liquid bonds. But either way this index provides a comprehensive measure against which to benchmark eurozone bond investing," Rieger added

The country weightings in the index at October 30, 2009 were Italy (23.3%), Germany (21.8%), France (20.2%), Spain (9.1%), Belgium (6.1%), Greece (5.4%), the Netherlands (5.1%), Austria (3.8%), Portugal (2.4%), Ireland (1.7%) and Finland (1.1%).

Cyprus, Luxembourg, Malta, Slovenia and Slovakia are not represented as they do not fulfill the criteria.

All European government bond types are included, with the exception of European government inflation indexed, floating rate and zero coupon bonds. To qualify for inclusion, the bonds must be denominated in euros and have a minimum issue size of at least €1 billion with a maturity greater than or equal to one year.

The index is sub-divided into sub-indexes differentiated by their constituents' range of maturities. It will undergo rebalancing on a monthly basis to ensure it remains current and does not have a set number of constituent bonds.