Monday, June 05, 2006

Deutsche Bank Liquid Commodities Indices Optimum Yield (DBLCI-OY)

Interesting development for commodity Investors and traders:

Deutsche issues flexible commodity index products

LONDON (Reuters) - Deutsche Bank said on Friday it was launching a new set of commodity index products, which will improve yields in passive, long-only instruments.

The Deutsche Bank Liquid Commodities Yield Indices Optimum Yield (DBLCI-OY) would improve on the traditional method of commodity indices where futures contracts roll on a pre-defined schedule, the bank said in its weekly report.

"The DBCLI-OY indices are designed so that rather than selecting the futures contract on a pre-defined schedule they roll into the futures contract that either maximises the positive yield roll in backwardated term structures or minimises the negative roll yield in contangoed markets," it said.

The Dow Jones-AIG, the Goldman Sachs Commodity Index and its own Deutsche Bank Liquid Commodity Index (DBLCI) have contracts which are rolled monthly, but the shifting pattern in commodity structures over the past few years has led to the creation of the new index, it added.

In a contango market, cash prices are cheaper than forward values, reflecting storage and insurance costs for future delivery. A backwardation is the opposite -- cash is dearer than the forward position, reflecting nearby shortages.

Metals, such as copper and zinc, recently at record highs, have established backwardation price structures stretching out five years in some instances. -source

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