iBoxx USD Asia ex-Japan Monthly Update: July 2020
June 2020 End-of-Month Commentary
USD Asia bonds rallied for the third consecutive month following
the sharpest bear market drop on record in March. The overall index
finished higher (+1.80%) in June and closed out the month at 219.95
(less than 3 index points away from its 6 March high1). Bond yields
and credit spreads continued to fall, though the pace of
contractions had decreased than those seen in the past two
Sovereign bonds (+2.40%) outperformed corporate bonds (+1.80%) in June. Within credit, high yield bonds (+3.55%) outperformed high grade bonds (+1.25%). Strong gains were observed in the medium to long term tenors in the high yield segment.
All corporate sectors advanced this month. Basic Materials (+3.59%) and Consumer Services (+2.89%) recorded the best performances, while Telecom (+0.91%) gained the least.
All top 7 markets in the index by market value performed well this month, with India (+3.32%) and Indonesia (+2.32%) returning more than the broader market (+1.80%).
For China $ bonds, high yield bonds outperformed investment grade bonds, returning 2.35% compared to 1.06%.
Within China $ corporates, Financials rose 1.64%, outperforming
Non-financials by 32bps. China Real Estate continued its momentum
in June with a return 2.34% and currently has a yield of
After a volatile first half of 2020, marked by a 3.73% drop in Q1 and a 6.19% rally in Q2, the overall index has returned 2.23% year-to-date and currently has a yield of 3.68%.
July 2020 Rebalance
A total of 72 bonds were added to the June membership. China Onshore alone contributed 39 bonds, bringing in $22.8 billion (or 55%) of the new notional added to the index.
12 bonds were removed from the membership, of which 10 matured in June. For a detailed breakdown of insertions and deletions, please refer to the Appendix in the full commentary.
After the July rebalance, the index duration increased by 0.10 to 4.41 years.
The largest duration change came from Thailand with an increase of 0.34 year for the market. The four new THB bonds added to the index are medium to long-dated, and have a combined notional of $1.8 billion, which represents about 11% of the total market value of all THB bonds in the index.
Indonesia has a duration of 8.24 years and is the most rate-sensitive market in the index.
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