April 2022 End-of-Month Commentary

Headline inflation remained hot in April. The ongoing conflict
in Ukraine maintained upward pressure on energy and commodity
prices around the world. The pandemic lockdown in China exacerbated
the supply chain bottlenecks, further boosting inflation in many
economies. In the U.S., domestic consumption accelerated at an
annualized rate of 2.7{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} in Q1 2022. In response, major central
banks shifted to a more hawkish stance in their monetary policies
to combat inflation.

Rising U.S. rates were a primary driver for Asian USD bond
weakness this year. The iBoxx USD Asia ex-Japan Index retreated
2.2{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} in April, marking its fourth consecutive monthly decline in

Asian credit spreads contracted this month, but the rise in
interest rates offset gains from the spread tightening. The USD
Asia IG index sank 2.49{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} with large losses seen in long maturity
buckets, while its average credit spread narrowed by 9 bps. The USD
Asia HY index fell 0.91{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5} as its spread shrank by 80 bps. The
CCC-rated segment plunged 7.56{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5}, dragged down by defaults of Sri
Lanka government bonds and Chinese real estate issuance.

China USD bonds outperformed the broader index this month by
about 1{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5}. Bond defaults in the China Real Estate sector (-0.23{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5})
continued to occur. However, correction in the sector had taken a
pause after Chinese top policy makers provided reassurance to
address the health of the sector and to stabilize the financial
market in China.

The USD China LGFV index (up 0.12{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5}) outperformed other
subindices in the USD China index series. It currently offers a
duration of 1.68 years and a yield of 4.55{4e908c29df01d999f087e4f922633998e2ded1c72f05851cd6252034960daee5}.

May 2022 Rebalance

This rebalance, the iBoxx USD Asia ex-Japan Index added 29
eligible bonds, bringing in close to USD 17.7 billion of new

The investment grade (IG) subindex saw about USD 14.5 billion of
notional raised from 23 new issues, while the high yield (HY)
subindex saw a little over USD 3.2 billion worth of notional from 6

Of the 57 bonds removed from the index this month:

  • 21 were traded flat of accrued interest, including 11 bonds
    belonging to the government of Sri Lanka and the rest from issuers
    in the China real estate sector; and
  • 6 were either called, partially redeemed or repurchased and
    became ineligible for the index.

One fallen angel and one rising star (based on iBoxx implied
credit rating methodology) were captured this month. Both USD bonds
were issued by local government financial vehicles (LGFV) in

Please refer to the Appendix in the full commentary 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 up slightly to
4.29 years. Markets with the most noticeable change in duration
were Malaysia (-0.21 years), Singapore (-0.14 years) and Taiwan (up
0.55 years).

There is currently no sovereign bond by Sri Lanka in the index,
as the country announced a default on all of its foreign debt in


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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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