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Markets continued to rally in May as talks around the gradual
reopening of domestic and global economies began to surface.
The iBoxx USD Asia ex-Japan index closed the month up 2.20% (and
down just 2.93% from the 6 March high). Credit spreads continued to
contract, yields slowly retraced back toward their pre-crisis
levels and market sentiment in general swung back to some "risk-on"
again.
Sovereign bonds (+3.07%) outperformed corporate bonds (+2.13%) in
May. Within credit, high yield bonds (+3.10%) outperformed high
grade bonds (+1.91%). Except for two TEMASE bonds in the AAA / 10+
segment, gains were observed across all rating and maturity
buckets.
All corporate sectors advanced this month. Health Care (+3.96%)
and Basic Materials (+3.96%) recorded the best performances, while
Technology (+1.10%) gained the least.
All top 7 markets in the index by market value performed well this
month, with India (+6.30%) and Indonesia (+5.59%) registering
larger gains than the broader market (+2.20%).
For China $ bonds, high yield bonds outperformed investment
grade bonds, returning 2.01% compared to 1.08%.
Within China $ corporates, Financials rose 1.52%, outperforming
Non-financials by 21bps. China Real Estate returns 2.02% this month
and currently has a yield of 7.83%.
June 2020 Rebalance
The latest rebalance added 24 bonds to the June membership. China
Onshore, Hong Kong and Indonesia together contributed 19 bonds,
making up $11.6 billion (or 75%) of the new notional added to the
index.
Of the 29 bonds removed from the index, 20 of them matured in May.
For a detailed breakdown of insertions and deletions, please refer
to the full commentary.
The index duration increased by 0.05 to 4.33 years after the
rebalance.
The Philippines saw its duration rise by 0.36 to 7.01 years,
largely due to the inclusion of two long-dated BBB bonds with a
combined notional of USD 2.35 billion.
Posted 08 June 2020 by Rahul Sharma, Director - Indices, IHS Markit
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