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iBoxx ALBI Monthly Update: November 2021
October 2021 EOM Commentary
Gains were seen across major stock markets globally, spurred by strong results in the latest corporate earnings season. Several major US banks contributed to the cause as their latest report cards surpassed market expectations. However, US GDP slowed sharply from 6.7% in Q2 to 2% in Q3, well below market consensus, sending mixed signals to investors.
In Asia, the Chinese property market continued to be distressed as more real estate developers fell into liquidity woes after Evergrande had begun to trade flat in late September.
The iBoxx Asian Local Bond Index (unhedged in USD) - mostly Asian local currency government bonds exposure (79.6%) - gained 0.21% in October despite most local markets ending the month in the red. This was due to the weakening of the US dollar against all but one (Indian Rupee) of the currencies represented in the index, which made up ground for capital losses in the overall index return. Indonesia was the only market (in local currency terms) that had a positive month, returning 0.78% month-on-month. South Korea and Singapore led the losses with returns of -2.63% and -1.57%, respectively.
Most markets were in negative territory across the yield curve and the largest losses were concentrated in the 10+ segment. South Korea 10+ (which was the worst performer last month) carried its poor performance into October as it returned -4.65%. Indonesia was the only market that saw a sea of green across the yield curve.
The overall index yield rose 16 bps and closed the month at 3.38%. All markets except Indonesia (-4 bps) contributed to the increase in yield. The largest yield upticks came from South Korea (+32 bps) and Singapore (+25 bps). India continues to be the highest yielding bond market in the index offering 6.63%, while Hong Kong, at 1.99%, remains the lowest yielding market in the index.
November 2021 Rebalance
The latest rebalance saw 25 bonds entering and 24 bonds leaving the overall index. Please refer to the Appendix for a detailed breakdown of insertions and deletions.
As announced in the 2021 Asian Annual Index Review results, an annual weight change will be applied to the individual markets in the index on 30 November 2021.
The index duration lengthened by 0.08 to 6.83 years after the recent rebalance. All markets except Thailand (-0.04 years) saw their duration increase this month, with the largest increase coming from South Korea (+0.19 years). Currently, South Korea has the longest duration (8.97 years ) while China Offshore remains the least sensitive market to interest rates with a duration of 2.99 years.
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