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iBoxx ALBI Monthly Update: September 2020
August 2020 End-of-Month Commentary
Stock markets made headlines with their continued rally this month against a supportive economic backdrop signaling recovery. The S&P 500 and Nasdaq, for instance, reached record highs in August, wiping out all pandemic related losses so far. Most Asian bourses followed suit.
In contrast, performances in the Asian local currency bond markets this month were relatively muted. The overall ALBI index gained 0.36% in August as FX gains in local currencies against the dollar outweighed losses in most local bond markets. Only Indonesia (+1.19%) and the Philippines (+0.39%) managed positive local currency returns this month.
Losses this month were concentrated in the long-end of the curve, with Singapore, South Korea, Hong Kong and India registering declines of more than 2% in their respective 10+ maturity segments. Notably, China Onshore has now slipped into its fourth consecutive month of losses.
The overall index yield increased by 15 bps to 2.84% at the end of the month, led by upticks in most markets, notably in India (+31 bps) and South Korea (+18 bps). Indonesia (-9 bps) and the Philippines (- 3 bps) were the two markets that saw a decrease in yield to 6.87% and 2.43%, respectively. Indonesia is currently the highest yielding bond market in the index.
September 2020 Rebalance
The latest rebalance saw 26 bonds entering and 27 bonds leaving the overall index. For a detailed breakdown of insertions and deletions, please refer to the full commentary.
The individual market weights of iBoxx ALBI are updated this month and are reflected in the full commentary. The next scheduled change will be on 31st November 2020 (the December rebalance).
The index duration increased by 0.07 to 7.01 years post rebalance. Apart from the Philippines and Singapore, all other markets saw their duration increase this month, with the largest change seen in Hong Kong (+0.23 years). South Korea continues to have the longest duration at 9.10 years while China Offshore remains the least sensitive to interest rates with a duration of 3.24 years.
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