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iBoxx ALBI Monthly Update: October 2021
September 2021 EOM Commentary
Markets across equities and fixed income took a turn for the worse in September after a slew of market events hit the streets. In Asia, news on the likely inability of China Evergrande Group to pay its debt obligations broke mid-September, causing contagion fears in the Chinese property market as well as in global markets. In the US, treasury yields rose after a hawkish stance was presented in the latest FOMC meeting. The yield of the iBoxx $ Treasuries index closed at 1.59% at September-end, up 17 bps month-on-month.
Asian local currency bond markets were not spared as the iBoxx ALBI lost 1.99% over the month with most markets in the red. The only exceptions were India (+1.01%), China Onshore (+0.22%) and China Offshore (+0.17%). South Korea and Thailand led the losses and returned -2.35% and -1.66%, respectively.
While most markets saw red throughout the yield curve, the highest gains and losses were concentrated in 10+ segment. India 10+ led the gains, returning 1.65%. Conversely, South Korea 10+ (-4.66%) posted the worst loss. Please note that the US dollar strengthened against all eligible local currencies this month.
The overall index yield gained 15 bps and registered at 3.22% at month end, contributed to by an increase in yield in all eligible markets except India. Thailand (2.24%) had a 20 bps increase in yield, while India (6.50%) dropped 6 bps. Despite the decline, India continues to be the highest yielding bond market in the index offering 6.50%, while Hong Kong, at 1.77%, remains the lowest yielding market in the index.
October 2021 Rebalance
The latest rebalance saw 29 bonds entering and 37 bonds leaving the overall index. Please refer to the Appendix for a detailed breakdown of insertions and deletions.
The weights of individual markets in the index will remain consistent until 30 Nov 2021 when an annual weight change is applied to the eligible markets.
The index duration lengthened by 0.23 to 6.89 years after the recent rebalance. All markets saw their duration increase this month, with the largest increase coming from Singapore (+0.50 years) - as maiden 30-year green bonds totalling SGD 1.65 bn in notional entered the index. Currently, South Korea has the longest duration (9.10 years) while China Offshore remains the least sensitive market to interest rates with a duration of 3.01 years.
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