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iBoxx ALBI Monthly Commentary: November 2020

05 November 2020 Rahul Sharma

October 2020 End-of-Month Commentary

As we pass the midway point between autumn equinox and winter solstice, a second wave of Covid-19 infections dominate the headlines in most parts of Europe and the United States. Closer to home, we also see a resurgence of Covid-19 in the region, such as in Malaysia which is battling its third wave of infections. The above, coupled with the uncertainty of the US Presidential elections, paints a backdrop of unpredictability going into the penultimate month of 2020.

In October, the overall ALBI index gained 1.59%, led by Indonesia (1.97%) and India (1.72%). Apart from South Korea (-0.76%) and Hong Kong (-0.04%), all other markets posted positive returns. It is also noteworthy that China Onshore returned to positive territory after five months of consecutive decline.

China Onshore, India, Indonesia, Malaysia, the Philippines and Singapore saw positive returns across the yield curve. The 7-10 and 10+ maturity buckets of Indonesia (2.22% and 2.46%, respectively), and 10+ segment of Singapore (2.10%) posted the biggest gains. On the flipside, the 10+ segments of South Korea (-1.41%) and Hong Kong (-0.89%) fared the worst.

The overall index yield remained unchanged at 2.81%. Indonesia (-0.22 bps) and India (-0.18 bps) led the declines this month, while the biggest yield upticks were observed in South Korea (0.09 bps) and China Offshore (0.04 bps). Indonesia remains the highest yielding bond market in the index offering 6.73%. Singapore is the lowest at 1.20%.

November 2020 Rebalance

The latest rebalance saw 21 bonds entering and 25 bonds leaving the overall index. For a detailed breakdown of insertions and deletions, please refer to the full commentary.

The individual market weights of iBoxx ALBI are reflected in the full commentary and the next scheduled change will be on 30th November 2020 (the December rebalance).

The index duration increased by 0.09 years to 7.06 years post rebalance. With the exception of Hong Kong and Thailand, all other markets saw their duration increase this month. The largest change this month was Singapore (+0.44 years) due to exit of a SGD 9.1bn SIGB. After the rebalance, South Korea continues to have the longest duration at 9.18 years while China Offshore remains the least sensitive to interest rates with a duration of 3.30 years.

Posted 05 November 2020 by Rahul Sharma, Director - Indices, IHS Markit

IHS Markit provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.

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