iBoxx ALBI Monthly Update: August 2021
July 2021 End-of-Month Commentary
The global economy continued on its recovery path in July. Notable events this calendar month included "Freedom Day" in England as well as the Tokyo 2020 Olympic Games which began on 23rd July. However, the threat of the more contagious coronavirus Delta variant undermined sentiments as COVID-19 cases started to climb in most parts of the world again. Some investors flocked towards safer assets such as government bonds, evidenced by both the iBoxx $ Treasuries and iBoxx € Eurozone indices outperforming their corporate counterparts by 23 and 66 bps, respectively.
In Asia, despite gains in all local currency markets within the iBoxx ALBI index - which consists largely of government bonds (79%) - it only gained 0.17% in July due to significant FX losses against the dollar. South Korea (+2.15%) and Indonesia (+1.62%) led the local market returns, while China Offshore (+0.17%) and India (+0.20%) delivered the lowest gains.
Gains were seen across the yield curve in most markets, where the highest returns were concentrated in the 10+ maturity segments of South Korea (+4.70%), China Onshore (+3.92%) and Singapore (+3.28%). India 10+ (-0.30%) was the only market segment that registered a loss.
All markets except for India (+5 bps) and China Offshore (+1 bps) saw their yields decline in July. As a result, the overall index yield tightened 15 bps to 3.04%. India continues to be the highest yielding bond market in the index offering 6.65%, while Hong Kong (-18 bps) remains the lowest yielding market in the index at 1.52%.
August 2021 Rebalance
The latest rebalance saw 31 bonds entering and 20 bonds leaving the overall index. Please refer to the Appendix for a detailed breakdown of insertions and deletions.
The base market weights of the index will remain consistent until 31 Nov 2021 when a new set of weights will be applied to the eligible markets.
The index duration lengthened by 0.05 to 6.91 years, after the recent rebalance. Most markets saw their duration increase this month, with the largest increase coming from the Philippines (+0.15 years) - as a large PHP 100 bn RPGB entered its final year to maturity and left the index. Thailand is the only market with a decrease in duration (-0.04 years). Currently, South Korea is the market with the longest duration (9.22 years) while China Offshore remains the least sensitive to interest rates with a duration of 3.09 years.
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