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iBoxx USD Asia ex-Japan Monthly Update: February 2022
Major markets started the year with increased volatility and investor cautiousness. In January, US Treasury (UST) yields rose rapidly amid elevated inflation and in anticipation of tighter monetary policies ahead. The 10-year UST yield1 surged more than a quarter of a percentage point higher, ending the month at 1.79%. With higher rates, price pressures were seen in high-valuation growth stocks and long duration bonds.
The iBoxx USD Asia ex-Japan index retreated -2.16% in response to the rise in UST yields. The index yield and the index credit spread widened by 0.45 percentage points (ppts) and 15 basis points (bps), respectively. Negative returns were observed in all maturity and rating sub-indices.
This month, the Asia USD IG and HY sub-indices both registered losses in performance. The Asia USD IG index declined -1.84% with its yield adjusting higher by 0.36 ppts, while the Asia USD HY index dropped -3.47% with its credit spreads widening 71 bps.
Returns of the seven largest markets in the index fell in the red, with India (-3.72%) and the Philippines (-2.87%) logging the largest losses.
In China, authorities cut key lending rates for the second consecutive month to further support economic growth.
However, sentiment towards China USD bonds (-2.19%) remained weak, particularly in the real estate sector. This sector saw bonds from two more issuers — China Aoyuan Group and Yuzhou Group — removed from the index due to missed coupon payments.
On the other hand, the China USD LGFV index (-0.07%) outperformed all other indices in the China USD index family. Its investment grade and high yield sub-indices recorded -0.19% and +0.31%, respectively.
February 2022 Rebalance
This rebalance, the iBoxx USD Asia ex-Japan index added 44 eligible bonds, bringing in approximately USD 28.8 billion of new notional.
The investment grade (IG) sub-index saw 39 new issues amounting to USD 26.2 billion, while the high yield (HY) sub-index saw about USD 2.6 billion worth of notional raised from 5 issues.
Of the 34 bonds removed from the index this month:
- 7 were traded flat of accrued interest - issued by 2 real estate developers in China and 1 consumer services company in India
- 2 became illiquid with no market quotes available
- 1 was partially repurchased and became ineligible for the index
Please refer to the full commentary for a breakdown of this month's insertions and deletions, and a list of fallen angels and rising stars recognised in 2021.
Post rebalance, the overall index duration was up slightly to 4.58 years. Markets with noticeable changes in duration were Hong Kong (+0.32 years) and India (+0.49 years).
In Hong Kong, Airport Authority issued four new bonds in January, with respective maturities of 5, 10, 30 and 40 years, and a combined notional of USD 4.0 billion.
In India, Indian Railway issued a BBB-rated, 10-year bond of USD 500 million in size. The country index also added corporate bonds from several sectors that contributed an additional USD 5.6 billion to its notional base.
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