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iBoxx USD Asia ex-Japan Monthly Update: August 2020

11 August 2020 Rahul Sharma

July 2020 End-of-Month Commentary

USD Asia bonds advanced in July as the index continued its rally for the fourth consecutive month. The overall index climbed 2.19% and finished the month at its all-time high of 224.76. Index yield and spread fell by 48bps and 41bps to 3.20% and 264bps, respectively. The index yield of iBoxx $ Treasures declined 15bps to 0.78% in the same period.

Sovereign bonds (+4.26%) outperformed non-sovereigns (+1.88%) in July. Within credit, high yield bonds (+2.24%) outperformed high grade bonds (+2.17%). While strong gains were observed in the medium to long term tenors in the IG segment, strong performance was also seen in the short to medium term tenors in the HY/non-CCC segment.

USD Asia corporates advanced (+1.95%) this month, boosted by Technology (+3.42%), Oil & Gas (+3.37%), and Utilities (+2.15%). All other sectors recorded gains of above 1%.

All top 7 markets in the index by market value closed in positive territory, but only Indonesia (+4.40%) and Philippines (+3.24%) outperformed the broader market (+2.19%).

For China $ bonds, investment grade and high yield bonds returned 1.78% and 1.73%, respectively.

Within China $ corporates, Non-Financials posted 2.10%, outperforming Financials by 53bps. China Real Estate rose by 1.81% and currently has a yield of 6.46%.

August 2020 Rebalance

The latest rebalance added 56 bonds to the August membership. China, Hong Kong and Macao together contributed 39 bonds, making up $17.7 billion (or 71%) of the new notional added to the index.

Of the 30 bonds removed from the index, 19 of them matured in July. There are 2 fallen angels captured in August, taking the total number of such bonds to 17 for the year.

For a detailed breakdown of insertions and deletions, and a list of fallen angels recognized in 2020, please refer to the Appendix in the full commentary.

The index duration increased by 0.01 to 4.52 years post the August rebalance.

The largest duration change came from Cambodia with an increase of 1.32 years, after a new bond with USD 350 million in notional was added to this market. Cambodia bonds make up less than 0.03% of the index, and thus have a muted impact on the overall index duration.

The second largest duration increase was Thailand (+0.66 years) after the inclusion of a long-dated BBB bond with a notional of USD 700 million.


Posted 11 August 2020 by Rahul Sharma, Director - Indices, IHS Markit

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