iBoxx ALBI Monthly Update: June 2021
May 2021 EOM Commentary
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.
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