iBoxx ALBI Monthly Update: Aug 2020

July 2020 End-of-Month Commentary

The overall index gained 1.66% in July as gains were seen across all markets with the exception of China Onshore. Indonesia was the best performing market (+2.82%), followed closely by Malaysia (+2.78%). At the other end of the spectrum, China Onshore entered into its third month of consecutive decline with returns of -0.74%, as investors continued to see a spike in special notes issuances to combat the virus outbreak.

Apart from China Onshore, gains were seen across all maturities in other markets. Investors particularly favored the longer end of the curve as the 10+ maturity segments of Malaysia (+4.51%), Singapore (+4.06%) and Indonesia (+3.55%) registered the largest gains across all maturity segments.

From a yield perspective, the overall index offered 2.68% by the end of the month (a reduction of 14 bps from the previous month-end, led by declines in Indonesia (-37 bps) and Malaysia (-35 bps)). China Onshore was the only market that saw a yield uptick this month, increasing by 17 bps to 3.32%.

August 2020 Rebalance

The latest rebalance saw 26 bonds entering and 22 bonds leaving the overall index. For a detailed breakdown of insertions and deletions, please refer to the full commentary.

The individual market weights of iBoxx ALBI are reflected in the full commentary and the next scheduled change will be on 31st Aug 2020 (the September rebalance).

The index duration has steadily increased over the years, and is now at its lengthiest since inception at 7.07 years. The largest change came from Malaysia with an increase of 0.22 years to 6.08 years. South Korea continues to have the longest duration at 9.20 years while China Offshore remains the least sensitive to interest rates with a duration of 3.26 years.

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Posted 06 August 2020 by Rahul Sharma, Director - Indices, IHS Markit