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Promising Covid-19 vaccine news stimulated surges in the
equities markets in November, even as infections rose in most parts
of the world. From a fixed income perspective, the 10-year US
treasury yield declined towards the end of the month as some
investors swooped for safer assets with governments initiating new
lockdowns.
In Asia, the overall ALBI index gained 2.17% as we ended the
penultimate month of 2020 with most markets in the green, with FX
gains across all markets against the dollar playing a significant
role. Indonesia (2.82%) and India (0.84%) had the best performance,
while Malaysia (-1.17%), South Korea (-0.71%) and Singapore
(-0.17%) were the only markets with negative returns.
Several markets saw gains across the yield curve, including
China Onshore, Hong Kong, India, Indonesia, the Philippines and
Thailand. Longer tenure bonds from Indonesia caught the eye with
returns of more than 3% in the 7-10 and 10+ maturity buckets.
Malaysia, on the other hand, posted losses across the yield
curve.
The overall index yield remained unchanged for the second month
running at 2.81%. Malaysia (19 bps) and South Korea (9 bps) saw the
highest yield uptick, while Indonesia's yield fell the most for the
second straight month (-36 bps). Despite the decline, Indonesia
remains the highest yielding bond market in the index offering
6.36%. Singapore is the lowest at 1.24%.
December 2020 Rebalance
The latest rebalance saw 32 bonds entering and 23 bonds leaving
the overall index. For a detailed breakdown of insertions and
deletions, please refer to the Appendix in the full commentary.
The individual market weights of iBoxx ALBI are changed this
month and are reflected in the chart above. The next scheduled
change will be on 28th February 2021 (the March rebalance).
The index duration is unchanged post rebalance at 7.00
years.
With the exception of Hong Kong and Singapore, all other markets
saw their duration increase this month. The largest changes this
month were observed in China Offshore (+0.09 years) and India
(+0.09 years). After the rebalance, South Korea continues to have
the longest duration at 9.05 years while China Offshore remains the
least sensitive to interest rates with a duration of 3.33
years.
Posted 07 December 2020 by Rahul Sharma, Director - Indices, IHS Markit
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