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iBoxx ALBI Monthly Update: May 2021

10 May 2021 Kangwei Yang

iBoxx ALBI Monthly Commentary

April 2021 End-of-Month Commentary

The latest trading month suggested more stability in bond markets following bouts of volatility and rapidly climbing US Treasury yields over earlier months this year. Whilst Asian local currency bonds were vulnerable to the general sell-off in bonds earlier this year, they navigated this period less negatively impacted. Indeed, year-to-date, the iBoxx ALBI index has lost 3.06% compared to the 3.78% loss incurred by the iBoxx $ Treasuries index.

This month, the overall ALBI index gained 1.67%. All markets except South Korea (-0.56%) posted positive returns in April, with Indonesia and Malaysia leading the way at 1.71% and 1.05%, respectively. Concurrently, apart from the Indian Rupee, all other local currencies appreciated against the US dollar and contributed to index performance.

Gains were seen across the yield curve for all markets except South Korea which saw negative returns in the medium to longer-end maturity segments. The majority of the index gains were concentrated in the 7-10 and 10+ buckets, led by Indonesia 7-10 (+2.42%) and Hong Kong 10+ (2.38%).

From a yield perspective, the overall index fell by 6bps to 3.21% in April. South Korea was the only market with a rise in index yield (+8bps), while Indonesia (-18bps) and Hong Kong (-15bps) posted the biggest declines. Indonesia remains the highest yielding bond market in the index offering 6.63% while Singapore is the lowest[1] at 1.84%.

Year-to-date, the iBoxx ALBI index yield ranged from a low of 2.76% to a high of 3.30%. In comparison, the iBoxx $ Treasuries recorded index yields between 1.07% and 1.75%.

May 2021 Rebalance

The latest rebalance saw 30 bonds entering and an equal number of bonds leaving the overall index. Please refer to the Appendix for a detailed breakdown of insertions and deletions.

The individual market weights of the iBoxx ALBI are reflected in the chart above. In the upcoming rebalance on 31 May 2021, China Onshore will reach its target weight of 20% in the index.

The index duration has lengthened by 0.09 to 6.79 years after the recent rebalance. Most markets, apart from Thailand (-0.06 years) and Hong Kong (-0.03 years) saw their duration increase this month. Singapore had the largest increase of 0.24 years with the exit of two bonds without replacement, including a large SGD 5.6bn SIGB.

Post rebalance, South Korea continues to be the market with the longest duration at 8.83 years[2] while China Offshore remains the least sensitive to interest rates with a duration of 3.13 years.


[1] Taiwan is not mentioned as it has 0% weight in the index

[2] Taiwan is not mentioned as it has 0% weight in the index

Posted 10 May 2021 by Kangwei Yang, Director - Indices, S&P Dow Jones Indices

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