The month of May featured plenty of extreme swings in financial
markets. With inflation uncomfortably high, several central banks
announced increases in benchmark rates this month. The widespread
regime shift in rate policies pressured valuations across asset
classes, which had ballooned for the past decade from record
low-interest rates. The 10-year U.S. Treasury yield topped 3.1{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} in
May, the highest since 2018, before ending the month at 2.74{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5}.
Rallies were short-lived, as uncertainty in rate policies coupled
with recession fear clouded the markets.

Asian USD bonds continued to face downward pressure this month.
The iBoxx USD Asia ex-Japan Index fell 0.15{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} in May, marking its
fifth consecutive monthly decline this year. The index showed signs
of stabilizing from the rising U.S. interest rates, as the drop in
performance this month was smaller than in the previous four
months. The index yield (flat at 0.0{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5}) and index credit spread (up
1.8 bps) were little changed at 5.32{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} and 242 bps,

This month, the USD Asia IG subindex outperformed its high yield
counterpart, returning 0.37{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} with the spread virtually unchanged.
In contrast, the USD Asia HY subindex sank 2.68{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} as its spread
widened by 57 bps, primarily driven by severe losses in the B- and
CCC-rated segments across the curve.

Meanwhile, China USD bonds were down 0.37{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} this month. In May,
the Chinese central bank unexpectedly cut its benchmark reference
rate for mortgages to aid the ailing property sector. Additionally,
another issuer—Sunac China Holdings Ltd—was removed from
the China Real Estate subindex (-6.72{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5}) at the month-end index
rebalance due to missed coupon payments for its debt

On the other hand, the USD China LGFV subindex outperformed the
broader USD China market this month, returning 0.76{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} against
-0.37{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5}. It currently offers a yield of 4.46{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} and a duration of 1.66

June 2022 Rebalance

This rebalance, the iBoxx USD Asia ex-Japan Index added 11
eligible bonds from Chinese and Korean markets, bringing in USD 4.9
billion of new notional.

The investment grade (IG) subindex saw about USD 4.5 billion of
notional raised from 10 new issues, while the high yield (HY)
subindex saw a little over USD 400 million worth of notional from 1

Of the 37 bonds removed from the index this month:

  • 10 were traded flat of accrued interest, all issued by Sunac
    China Holdings Ltd (a property developer in China); and
  • 2 were either redeemed or repurchased and became ineligible for
    the index

Two fallen angels were captured this month. Both were
short-dated, senior USD bonds from the Philippines and Indian

Please refer to the Appendix in the full report for a breakdown
of this month’s insertions and deletions, and a list of fallen
angels and rising stars recognized in 2022.

Post-rebalance, the overall index duration was down slightly to
4.29 years. Markets with the most noticeable change in duration
were Hong Kong (up 0.05 years), Indonesia (-0.04 years) and
Pakistan (-0.05 years).

Among the largest seven markets in the index, Indonesia (up
0.37{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5}), South Korea (up 0.44{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5}) and the Philippines (up 1.02{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5}) were
relative outperformers, while Mainland China (-0.37{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5}) was the worst


Posted 08 June 2022 by Wilson Mak, Analyst – 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.

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.


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