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iBoxx ALBI Monthly Update: June 2020

08 June 2020 Rahul Sharma

May 2020 End-of-Month Commentary

Most markets carried on their momentum from April and continued to progress in May, as reflected in the performance of the overall index (+0.30%). Indonesia led the pack with a 2.86% monthly gain. However, China Onshore (-1.48%), Hong Kong (0.92%) and China Offshore (-0.06%) posted negative returns amidst escalating trade tensions between the US and China.

Apart from the Indonesian Rupiah and Thai Baht, the other local currencies depreciated against the dollar. Accrual (0.31%) and capital returns (0.39%), however, outweighed FX losses (-0.40%), which led to the uptick in the overall index.

Substantial gains were seen in the mid to long-end of the curves of India, Indonesia, the Philippines and South Korea. In particular, the 5-7 (+3.04%), 7-10 (4.31%) and 10+ (3.11%) maturity segments of Indonesia recorded the highest gains in May. The biggest losses were attributed to the 10+ maturity segments of China Onshore (-2.35%), China Offshore (-2.24%) and Hong Kong (-2.03%).

The overall index yield decreased by 3 bps to 2.79%, with Indonesia (-0.38 bps) and the Philippines (-0.25 bps) leading the decline. On the other hand, the yield of China Onshore and Hong Kong gained 30 bps and 23 bps respectively. Despite its recent yield compression, Indonesia continues to be the highest yield market in the index (7.55%).

June 2020 Rebalance

The latest rebalance saw 18 bonds entering and 24 bonds leaving the overall index. For a detailed breakdown of insertions and deletions, please refer to the full commentary.

The market weights of iBoxx ALBI changed this month as per schedule. The next scheduled weight change will be on 31st Aug 2020 (the September rebalance).

The index duration remained relatively unchanged at 6.91 years after the rebalance. The largest duration change post rebalance was Hong Kong (+0.21 years), largely due to a number of large HKD bonds (>HKD 1bn) leaving the index and a 30-year HKD 1.24bn bond from Hongkong Electric Finance Ltd entering the index.

Thailand continues to have the highest duration exposure at 9.07 years while China Offshore remains the least sensitive to interest rates with a duration of 3.00 years.

See full report here

Posted 08 June 2020 by Rahul Sharma, 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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