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iBoxx USD Asia ex-Japan Monthly Update: June 2021

07 June 2021 Wilson Mak

May 2021 Performance

Trending inflation anxiety somewhat subsided in May even though markets remain cautious; especially around near-term inflation expectations for those economies that continue to improve.

In the U.S., further out on the curve, the 10-year treasury yield† hovered around 1.60% this month while the 10s-5s breakeven curve spread† stayed above 14 bps (as it has done since the end of April).

Against a backdrop of rising growth expectation and a weaker dollar, the iBoxx USD Asia ex-Japan index climbed 0.53% in May. The index yield and spread both fell slightly to 3.28% and 196 bps, respectively. For comparison, the iBoxx $ Treasures index gained 0.35% with its yield falling to 1.63% over the same period.

Longer duration USD Asia sovereigns outperformed corporates for the second consecutive month. As in April, but to a lesser extent, high yield bonds (+0.75%) outperformed high grade bonds (+0.45%) in May. Strong performance was observed in the CCC segment (+4.19%) where gains were seen across all maturity buckets.

The top 7 markets (by market value) in the index all posted gains of less than 1%.

All corporate sectors were higher, with Health Care, Technology and Telecommunications sectors leading.

China USD bonds rallied (+0.42%), with sovereigns (+0.66%) outperforming both high grade (+0.35%) and high yield bonds (0.62%).

The China Real Estate sector's month-onmonth performance fell in May but continued to outperform the broad China sector. The China LGFV segment gained +0.95% this month, with strong performance coming from the high yield (+1.93%) bucket, while high grade LGFV bonds delivered 0.63%.

June 2021 Rebalance

Thirty-three new bonds entered the index this month, adding close to USD 143 billion of new notional, the lowest amount so far this year.

Mainland China and Korea added 23 new issuances, accounting for almost USD 95.1 billion (or 71.4%) of the new notional.

Of the 28 bonds removed from the index, four were partially repurchased and became ineligible for the index. Only one bond was called.

No fallen angel nor rising star was captured last month.

Please refer to the Appendix for a breakdown of this month's insertions and deletions, and a list of fallen angels and rising stars recognised in 2021.

The overall index duration moved slightly higher to 4.40 years post rebalance. Some markets with large duration changes included India (+0.03 years), Indonesia (+0.03 years) and Malaysia (-0.05 years).

Country index India replaced its matured, USD 300 million bond from Tata Motors Ltd with a USD 707 million, long-dated bond from the Utility sector. Indonesian market added three medium-dated bonds with a combined notional of USD 885 million, as one of its largest government bonds (USD 2.5 billion in size) matured in May.

Malaysia expanded its notional base by USD 10 billion, with a 5-year and a 10-year bond from Khazanah Nasional Berhad, a sovereign wealth fund of the Government of Malaysia, lowering its country index duration to 8.19 years.


Posted 07 June 2021 by Wilson Mak, Analyst - Indices, S&P Dow Jones Indices

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