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iBoxx ALBI Monthly Update: February 2022

04 February 2022 Kangwei Yang

January 2022 End-of-Month Commentary

'Inflationary pressures', 'hawkish Federal Reserve', '(multiple) rising interest rates', 'strong job market outlook' - these were some of the keywords that greeted investors In January. As a result, tech stocks - known to be sensitive to rising rates - were battered over the month (especially those with high valuations). The broader equities market - as per the EMIX All World Index - was dragged into the red as well, losing 5.17% year-to-date.

Against the backdrop of a rising interest rates environment, the iBoxx US Treasuries Index made a loss of -1.85% as its yield crept up by 28 bps to 1.91% (its highest level since January 2020).

In Asian fixed income, the iBoxx Asian Local Bond Index (unhedged in USD) also posted a loss of - 0.88% in January. Apart from China Onshore (0.91%) and China Offshore (0.57%), all other eligible markets were in the red. South Korea (-2.21%) and Hong Kong (-1.28%), were the worst performers.

Both China Onshore and China Offshore saw gains (in local currency terms) across the yield curve for the second month running, of which the highest gain was observed in China Onshore 10+ (1.15%). Hong Kong, Singapore, South Korea and Thailand, on the other hand, saw declines across maturities. For the third time in the previous four months, South Korea 10+ (-3.93%) was once again the worst performing maturity segment.

In line with global government bond yields, the overall index (where government bonds make up approximately 80% of total weight) yield increased this month, inching up by 11 bps to 3.41%. The largest yield uptick was observed in Hong Kong (+31 bps), while China Onshore (-11 bps) saw the largest decline. India remains the highest yielding bond market in the index offering 6.89%, while Singapore (2.09%) took over from Hong Kong as the lowest yielding market in the index.

February 2022 Rebalance

The latest rebalance saw 25 bonds entering and 33 bonds leaving the overall index. Please refer to the full commentary 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 full commentary.

The index duration lengthened by 0.04 to 6.78 years after the recent rebalance. All markets except South Korea (-0.02 years) and Thailand (-0.03 years) saw their duration increase this month, with the largest increase coming from Hong Kong (+0.23 years). Effectively, South Korea currently has the longest duration (8.93 years) while China Offshore remains the least sensitive market to interest rates with a duration of 3.05 years.

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Posted 04 February 2022 by Kangwei Yang, 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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