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iBoxx USD Asia ex-Japan Monthly Update: January 2022

06 January 2022 Wilson Mak

December 2021 End-of-Month Commentary

In December, major central banks announced their decisions to adapt less accommodative policies1 amid continuing inflation worries. In contrast, China's central bank cut the one-year loan prime rate, a benchmark lending rate, and said it will implement proactive policies to support its economy. Moreover, with growing Omicron-variant case counts across the globe, the market narrative increasingly focused on the economic implications of the developing COVID-19 situation heading into 2022.

This month, the iBoxx USD Asia ex-Japan index rebounded (+0.13%) after a three-month decline (a decline that was largely driven by China's softening property development market). The index yield remained unchanged but the index spread fell 10 bps to 209 bps.

From a rating perspective, high yield bonds (+0.21%) outperformed high grade (+0.11%) for the first time since last August. In high grade, BBB-rated bonds outperformed A and higher rated bonds across the curve, while in high yield, the entire CCC-rated segment recorded heavy losses.

Among the largest seven index markets, Indonesia (+1.22%) and the Philippines (+1.15%) were the best performers this month.

Sectors with durations over 5 years recorded losses. All other sectors posted gains.

China USD bonds (-0.07%) dropped for the fourth straight month. This segment lost 5.47% over 2021.

The China USD LGFV index had a strong year, gaining 3.26% in 2021. Its investment grade and high yield sub-indices recorded 1.69% and 7.97%, respectively.

Over the past year, the overall index delivered a loss of -2.27%, with sovereign bonds (+0.29%) considerably outperforming corporate bonds (-2.93%). In the major markets, India led with a gain of 3.58%, while China was the worst performer returning -5.47%.

January 2022 Rebalance

This rebalance, Mainland China and India added 10 new bonds to the index, bringing in USD 3.9 billion of new notional.

Of the 30 bonds removed from the index universe:

  • 3 were traded flat of accrued interest - all guaranteed by Fujian Yango Group (a Chinese property developer)
  • 4 were either redeemed or restructured, and became ineligible for the index

In December, seven fallen angels were captured in the China real estate sector and they belonged to the same issuer, Shimao Group Holdings.

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 dipped slightly to 4.59 years. Markets with noticeable changes in duration were Hong Kong (+0.07 years), Malaysia (-0.10 years), Taiwan (-0.09 years) and Thailand (- 0.06 years).

This month, additions to the index were all medium-dated corporate bonds: 9 from financials sector in mainland China and 1 from Utilities sector in India.


Posted 06 January 2022 by Wilson Mak, Analyst - Indices, S&P Dow Jones Indices

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