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A crackdown on the mining and trading of cryptocurrency was the
talk of the town this month as Chinese authorities sought to
restrain crypto-related activities amid growing concerns over the
lack of regulations and oversight on the alternative asset. As a
result, the most mainstream cryptocurrency - Bitcoin -saw its
valuation plunge significantly. Traditional assets such as equities
and fixed income were less bumpy in comparison. US Equities stayed
relatively flat, while on the fixed income side, the iBoxx USD
Investment Grade index returned 0.52%.
In Asia, the iBoxx ALBI index gained 1.12%, continuing its
positive momentum from April. All eligible markets except South
Korea (-0.26%) were in the green, led by Indonesia (+1.12%) and
Singapore (+1.06%). From a rolling 1-year return perspective,
Indonesia has outperformed other markets significantly, gaining
13.72%, while the next best performer, India, has returned
4.66%.
Gains were observed across the yield curve for the majority of
the index markets, where the largest returns were posted in the 10+
maturity segments, led by Singapore 10+ (+2.42%) and Hong Kong 10+
(+2.03%). South Korea, conversely, suffered losses across all its
maturity buckets.
The overall index yield dropped 3bps to 3.18% in May. Hong Kong
(-15bps) and Singapore (-11bps) had the largest yield decline,
while South Korea (+5bps) and Malaysia (+2bps) recorded the highest
upticks. Indonesia remains the highest yielding bond market in the
index offering 6.54%, with India close behind at 6.46%. Hong Kong
has now replaced Singapore to become the lowest yielding market in
the index at 1.71%.
June 2021 Rebalance
The latest rebalance saw 26 bonds entering and 23 bonds leaving
the overall index. Please refer to the Appendix for a detailed
breakdown of insertions and deletions.
After this rebalance, the weight of China Onshore has reached
its maximum permissible weight of 20% in the index. This marked the
completion of the quarterly index weight adjustment that started
from 30 November 2016.
The index duration has lengthened by 0.09 to 6.83 years after
the recent rebalance. Most markets saw their duration increase this
month, with the largest increase coming from Thailand (+0.36
years). A large issue in excess of THB 200bn was replaced by two
Thailand government bonds with a combined notional of less than THB
70bn.
Post rebalance, Thailand overtook South Korea to claim the
longest market duration of 8.76 years while China Offshore remained
the least sensitive to interest rates with a duration of 3.08
years.
Posted 07 June 2021 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.
