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iBoxx USD Asia ex-Japan Monthly Update: October 2020

08 October 2020 Rahul Sharma

The rally in Asia USD bonds that began in late March and carried over into summer months took a breather in September. The overall index slipped -0.60% this month, marking the end of a five-month rally and the second month this year with a negative performance.

The overall index yield rose 0.18% to 3.35% while the index spread widened 20 bps to 268 bps. The yield of iBoxx $ Treasuries index fell 0.02% to 0.92% in the same period.

Non-sovereign bonds outperformed this month, down only -0.48% compared to decline of -1.43% for the sovereigns. In the credit space, high grade bonds drifted lower by -0.23% but high yield bonds surrendered -1.78%. The AAA rated segment recorded the highest gain this month, while BB and B segments registered losses across all maturity buckets.

Asia USD corporates were dragged lower (-0.53%) this month, with eight of the ten sectors in negative territory. Basic Materials (-1.06%) took the biggest hits, while Consumer Goods (+0.32%) and Health Care (+0.13%) sectors were the only gainers.

Within the top 7 markets in the index by market value, only Hong Kong (+0.07%) and South Korea (+0.15%) finished higher.

For China USD bonds, investment grade recorded smaller losses compared to high yield, returning -0.22% compared to -1.46%.

Within China USD corporates, Non-Financials posted -0.53%, while Financials returned -0.70%. China Real Estate returned -1.35% this month and currently has a yield of 7.15%.

October 2020 Rebalance

The October rebalance added 57 bonds to the index. Mainland China, Hong Kong and South Korea combined accounted for 50 bonds, adding over USD 28 billion (or 77%) of the new notional.

Of the bonds removed from the index this month, two were redeemed in full, one was refinanced, and one was partially repurchased and became ineligible for the index.

There are six fallen angels captured this month, five of them coming from the banking sector in India and the remaining one from the insurance sector in Hong Kong.

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

The overall index duration increased by 0.04 to 4.43 years to begin the final quarter of the year.

Taiwan had the largest duration increase of 1.54 years post rebalance. This market added three new medium-dated bonds with an aggregated issuance size of USD 3 billion from TSMC Global Ltd, a subsidiary of TSMC.

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Posted 08 October 2020 by Rahul Sharma, Director - Indices, IHS Markit

IHS Markit provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.


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