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2020 has been an unprecedented year and will go down as one of
the most eventful years in history. Stock markets plunged in the
early months of 2020 as Covid-19 struck but rebounded swiftly to
reach new heights, with economies restarting after lockdowns in
most parts of the world. Central bank rates were also cut across
the board to spur ailing economies which brought about low yields
in global fixed income assets. As a result, some investors have
begun to look into the credit space as well as emerging markets for
yield pick-up.
On this note, the overall ALBI index, which features several
emerging markets, ended 2020 with a year-on-year gain of 9.55%. All
markets covered in the index recorded gains for the year, with
Indonesia (+15.10%) and India (+12.61%) leading the pack. South
Korea was the most muted market, returning 1.01% in the same
timeframe.
In December, gains were observed across the yield curve except
for the 3-5 years segment of China Offshore and the 7+ years
segment of South Korea. The best performing segment was the 10+
maturity bucket (+2.32%), led by Indonesia (+3.97%) and Malaysia
(+3.05%). From the FX perspective, apart from HKD, all other local
currencies appreciated against the US Dollar.
The overall index yield dropped 3 bps to 2.78% as we ended the
year, dragged down by Indonesia (-26 bps) and Malaysia (-15 bps).
Notably, the yield of Indonesia fell for the third straight month.
Despite the decline, Indonesia remains the highest yielding bond
market in the index offering 6.11%. Singapore is the lowest2 at
1.23%.
January 2021 Rebalance
The latest rebalance saw 19 bonds entering and 17 bonds leaving
the overall index. For a detailed breakdown of insertions and
deletions, please refer to the Appendix.
The individual market weights of iBoxx ALBI are reflected in the
chart above and the next scheduled change will be on 28th February
2021 (the March rebalance).
Post rebalance, the index duration has extended by 0.09 to 7.06
years.
All markets saw their duration increase this month, except for
the Philippines which shortened by 0.02 years. The largest change
was observed for Thailand (+0.27 years) as a large THB 211 bn Thai
Government Bond left the index as it approached its last year to
maturity. After the rebalance, Thailand overtook South Korea to
have the longest duration at 9.34 years1 while China Offshore
remained the least sensitive to interest rates with a duration of
3.34 years.
Posted 07 January 2021 by Kangwei Yang, Associate 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.
