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iBoxx ALBI Monthly Update: December 2021

03 December 2021 Kangwei Yang

November 2021 Commentary

Jitters were felt across major markets after first reports of the new Omicron variant surfaced towards the end of November. Many countries reacted swiftly to the news and shut their borders to numerous nations where the new Covid-19 variant was reported. This is a fresh setback, especially for travel-related businesses, who have been looking forward to the resumption of travel for both business and leisure in the coming months.

US stock markets slid sharply on reopening after the Thanksgiving holiday, while the average yield on US treasuries (as per the iBoxx $ Treasuries index) tightened on the news, falling 14 bps to 1.55% on 26th of November and ended the month at 1.53%.

In Asian fixed income, the iBoxx Asian Local Bond Index (unhedged in USD) returned 0.11% in November as capital gains in most eligible markets outweighed FX losses against the U.S. dollar. In local currency terms, the best performing markets were South Korea (+2.97%) and India (+1.24%), while the Philippines (-0.40%) was the only eligible market that fell into negative territory.

It was a good month for most ALBI markets across the yield curve and the largest gains were concentrated in the 10+ segment. South Korea 10+ (the poorest segment for the past two months) performed the best as it returned 5.40%. The Philippines was the only market that saw declines across maturities with its 3-5 years bucket (-0.86%) posting the lowest maturity segment return across the overall index.

The overall index yield declined by 12 bps and closed the month at 3.25%. The largest fall in yield came from South Korea (-30 bps), while the biggest uptick was observed in the Philippines (+13 bps). India remains the highest yielding bond market in the index offering 6.53%, while Singapore (1.97%) replaced Hong Kong as the lowest yielding market in the index.

December 2021 Rebalance

The latest rebalance saw 34 bonds entering and 26 bonds leaving the overall index. Please refer to the full report for a detailed breakdown of insertions and deletions.

As announced in the 2021 Asian Annual Index Review results, an annual weight change has been applied on the individual markets in the index on 30 November 2021. The latest weights are updated in the above chart.

The index duration lengthened by 0.04 to 6.86 years after the recent rebalance. All markets except Singapore (-0.06 years) and Indonesia (-0.01 years) saw their duration increase this month, with the largest increase coming from Thailand (+0.22 years). Effectively, South Korea currently has the longest duration (9.16 years) while China Offshore remains the least sensitive market to interest rates with a duration of 3.03 years.


Posted 03 December 2021 by Kangwei Yang, Director - Indices, S&P Dow Jones Indices

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