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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, IHS Markit
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