november 2015 data as of october 30th, 2015 … › www › blog › commentary › pdf ›...

November 2015 1

October sees global fixed income relief rally Investors have returned to fixed income after a cautious past couple of months, with corporate bonds and emerging markets leading the returns.

HY bonds in the US and Europe returned 3.3% and 3.2%, respectively, in October

Turkey led the way in EM, with sovereign bonds returning 5.5% just before the election

HY bond ETFs saw $6.1bn of inflows in October, the highest monthly inflow in 2015

Market overview After a volatile August and September in fixed income markets, which saw investors retreat from the asset class, October proved a fruitful month as calmer markets aided a return to fixed income. Among developed nation sovereign bonds, Europe outperformed its UK and US counterparts. With the expectation of further monetary stimulus in the eurozone area, a risk on sentiment pushed down yields in the region. This was even true for safe haven assets, with German bunds posting a 0.5% return over the past month. The highest returns were, however, led by the peripheral names such as Italy and Spain, which returned 1.6% and 1.5%, respectively, over the month. A bounce in commodity prices, further global monetary easing, a drop in market volatility and lesser idiosyncratic risks were just some of the factors that led to the October corporate bond rally, especially in the riskier high yield (HY) segment. US and European HY bonds returned 3.3% and 3.2%, respectively, with US HY now just 0.5% shy of breaking even in 2015. The much smaller, less liquid UK HY market, however, remains the best performing HY market in 2015, having earned investors 4.7% so far. In US investment grade (IG) credit, the basic materials and the oil & gas sectors were the

best performing, with returns of 1.9% and 1.24%, respectively. Even though the bounce in commodity prices was minor in price terms, it acted as a bottom and did much to reverse the negative sentiment experienced by commodity heavy sectors over the past couple months. US investment grade also saw some decoupling in sectors, for example the difference in returns in the Healthcare and Telecoms sectors, two defensive sectors. This was partly led by idiosyncratic risks, such as that of HY credit Valeant, but may also be a sign that while the US economy remains stable, single name credit risks remain as re-leveraging takes place. European investment grade was far more profitable, aided by ECB rhetoric of further monetary stimulus. Banks returned 1.1% over the past month and are the only sector along with their parent Financials in the green for 2015. The insurance sector posted a 2.91%, over a percentage point higher than the next best performing sector, as long duration corporate bonds were also helped by underlying rates falling. In emerging markets (EM), Turkish sovereign bonds were the stand out asset, returning 5.4% in October. The more positive sentiment around Turkey was ratified over the weekend when the incumbent government won a majority in a general election, with markets now expecting a more stable economic and political environment. Russian sovereign

Markit iBoxx monthly

November 2015 Data as of October 30th, 2015

Markit iBoxx fixed income monthly market monitor \ November 2015

November 2015 2

bonds have also continued their march this year with an extra 4.2% return in October, taking 2015’s total to a staggering 29.3%, but risks may be on the horizon as the US prepares to hike rates. Fixed income ETFs HY fixed income ETFs saw their biggest monthly inflow in 2015, with investors piling into the asset class as global market nerves settled. $6.1bn was added in total, with $5.3bn coming from ETFs tracking US HY and the rest from those tracking Europe. Covered bonds, whose spreads have been squeezed by ongoing ECB purchases, saw a $195m outflow as safe haven was shunned. Among the new ETF launches in October were two corporate bond ETFs from provider Guggenheim Funds, in US HY (BSJN) and IG (BSCP). db x-trackers – Europe also launched a US corporate bond fund (XDGU), as corporate bonds return to investors’ appetite.

November 2015

3

Contents

Facts and figures ................................................................................................................................................ 4

Key trends: Markit iBoxx € Corporates and € Eurozone ............................................................................. 11

Key trends: Markit iBoxx € spot and swap curve ........................................................................................ 11

Key trends: Markit iBoxx £ Corporates and £ Gilts .................................................................................... 13

Key trends: Markit iBoxx £ spot and swap curve ........................................................................................ 14

Key trends: Markit iBoxx $ Corporates and $ Treasuries............................................................................ 15

Key trends: Markit iBoxx $ spot and swap curve ........................................................................................ 16

Fixed income ETF market activity ................................................................................................................... 19


November 2015

4

Fixed income market

Facts and figures


November 2015 5

Figure 1: Global fixed income market YTD total returns

1.4%0.6%1.2%1.4%

4.8%

2.0%0.6%

-0.5%-0.5%

2.2%

-0.3%

4.7%

1.5%3.1%

1.7%

29.3%

5.1%

7.7%

-0.1%

4.6%

-0.9%

0.6%1.5%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

US

UK

Ge

rma

ny

Fra

nce

Italy

Sp

ain

US

IG

US

HY

EU

IG

EU

HY

UK

IG

UK

HY

EM

So

v U

SD

EM

Co

rp U

SD

Bra

zil

Ru

ssia

Ch

ina

Ind

ia

Tu

rke

y

Me

xico US

UK

Ge

rma

ny

Figure 2: Global fixed income market MTD total returns

-0.3%

-1.2%

0.5%0.9%

1.6%1.5%

0.7%

3.3%

1.4%

3.2%

0.2%

2.4%2.8%2.8%

1.8%

4.2%

1.2%

0.5%

5.4%

0.8%0.4%

-1.7%

1.8%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

US

UK

Ge

rma

ny

Fra

nce

Italy

Sp

ain

US

IG

US

HY

EU

IG

EU

HY

UK

IG

UK

HY

EM

So

v U

SD

EM

Co

rp U

SD

Bra

zil

Ru

ssia

Ch

ina

Ind

ia

Tu

rke

y

Me

xico US

UK

Ge

rma

ny

Source: Markit iBoxx Data

Sovereigns

Corporates Emerging Markets Inflation Sovereigns

Sovereigns Corporates Emerging Markets Inflation

YTD

Oct


November 2015

6

Fixed income correlation

Table 1: 1-month correlation Correlation is based on daily returns for the period stated, excluding common holidays Correlation between indices in different currencies is based on unhedged daily returns in USD of the two indices Markit iBoxx CVBX index represents the performance of USD denominated convertible bonds

EUR GBP USD

Sov Corp IG HY Gilts Corp IG HY IL TSY Corp IG HY TIPS EM Sov

EM Corp Loans CVBX

EUR

Sov 1.00 0.88 -0.30 0.77 0.76 0.51 0.60 0.67 0.52 -0.18 0.42 -0.20 0.06 -0.18 -0.29

Corp IG 0.88 1.00 0.09 0.70 0.72 0.56 0.55 0.58 0.46 -0.03 0.34 -0.14 0.15 -0.06 -0.25

HY -0.30 0.09 1.00 0.56 0.60 0.56 0.43 0.41 0.34 0.14 0.19 -0.02 0.26 0.05 -0.12

GBP

Gilts 0.77 0.70 0.56 1.00 0.97 -0.42 0.78 0.74 0.61 -0.35 0.60 -0.29 -0.06 -0.31 -0.46

Corp IG 0.76 0.72 0.60 0.97 1.00 -0.35 0.71 0.72 0.61 -0.22 0.56 -0.20 0.03 -0.23 -0.40

HY 0.51 0.56 0.56 -0.42 -0.35 1.00 -0.16 0.36 0.30 0.13 0.27 0.04 0.18 -0.07 -0.23

IL 0.60 0.55 0.43 0.78 0.71 -0.16 1.00 0.63 0.55 -0.29 0.52 -0.20 -0.01 -0.25 -0.36

USD

TSY 0.67 0.58 0.41 0.74 0.72 0.36 0.63 1.00 0.90 -0.39 0.78 -0.12 0.23 -0.35 -0.27

Corp IG 0.52 0.46 0.34 0.61 0.61 0.30 0.55 0.90 1.00 -0.10 0.65 0.01 0.42 -0.08 -0.11

HY -0.18 -0.03 0.14 -0.35 -0.22 0.13 -0.29 -0.39 -0.10 1.00 -0.46 0.50 0.52 0.68 0.37

TIPS 0.42 0.34 0.19 0.60 0.56 0.27 0.52 0.78 0.65 -0.46 1.00 -0.14 0.15 -0.64 -0.32

EM Sov -0.20 -0.14 -0.02 -0.29 -0.20 0.04 -0.20 -0.12 0.01 0.50 -0.14 1.00 0.82 0.03 0.67

EM Corp 0.06 0.15 0.26 -0.06 0.03 0.18 -0.01 0.23 0.42 0.52 0.15 0.82 1.00 0.14 0.47

Loans -0.18 -0.06 0.05 -0.31 -0.23 -0.07 -0.25 -0.35 -0.08 0.68 -0.64 0.03 0.14 1.00 0.10

CVBX -0.29 -0.25 -0.12 -0.46 -0.40 -0.23 -0.36 -0.27 -0.11 0.37 -0.32 0.67 0.47 0.10 1.00



November 2015 7

Fixed income correlation

Table 2: 1-year correlation Correlation is based on daily returns for the period stated, excluding common holidays Correlation between indices in different currencies is based on unhedged daily returns in USD of the two indices Markit iBoxx CVBX index represents the performance of USD denominated convertible bonds

EUR GBP USD

Sov Corp IG HY Gilts Corp IG HY IL TSY Corp IG HY TIPS EM Sov

EM Corp Loans CVBX

Euro

Sov 1.00 0.81 0.10 0.62 0.61 0.44 0.49 0.10 0.09 -0.27 0.26 0.13 0.02 -0.12 -0.04

Corp IG 0.81 1.00 0.29 0.56 0.57 0.47 0.41 0.06 0.06 -0.22 0.19 0.09 0.03 -0.11 -0.07

HY 0.10 0.29 1.00 0.43 0.48 0.52 0.29 -0.01 0.00 -0.08 0.08 0.11 0.08 -0.03 -0.02

GBP

Gilts 0.62 0.56 0.43 1.00 0.97 -0.17 0.83 0.32 0.32 -0.17 0.45 0.15 0.09 -0.15 0.01

Corp IG 0.61 0.57 0.48 0.97 1.00 0.00 0.80 0.28 0.30 -0.05 0.38 0.18 0.15 -0.07 0.08

HY 0.44 0.47 0.52 -0.17 0.00 1.00 -0.15 0.10 0.12 0.19 0.10 0.17 0.23 0.11 0.16

IL 0.49 0.41 0.29 0.83 0.80 -0.15 1.00 0.34 0.34 -0.15 0.53 0.13 0.08 -0.18 0.00

USD

TSY 0.10 0.06 -0.01 0.32 0.28 0.10 0.34 1.00 0.94 0.00 0.57 -0.06 0.17 -0.35 -0.11

Corp IG 0.09 0.06 0.00 0.32 0.30 0.12 0.34 0.94 1.00 0.13 0.57 0.13 0.39 -0.14 0.07

HY -0.27 -0.22 -0.08 -0.17 -0.05 0.19 -0.15 0.00 0.13 1.00 -0.09 0.28 0.40 0.43 0.36

TIPS 0.26 0.19 0.08 0.45 0.38 0.10 0.53 0.57 0.57 -0.09 1.00 0.16 0.22 -0.14 -0.01

EM Sov 0.13 0.09 0.11 0.15 0.18 0.17 0.13 -0.06 0.13 0.28 0.16 1.00 0.80 0.35 0.56

EM Corp 0.02 0.03 0.08 0.09 0.15 0.23 0.08 0.17 0.39 0.40 0.22 0.80 1.00 0.48 0.58

Loans -0.12 -0.11 -0.03 -0.15 -0.07 0.11 -0.18 -0.35 -0.14 0.43 -0.14 0.35 0.48 1.00 0.50

CVBX -0.04 -0.07 -0.02 0.01 0.08 0.16 0.00 -0.11 0.07 0.36 -0.01 0.56 0.58 0.50 1.00



November 2015

8

Table 3: Markit iBoxx € market snapshot: the month in figures

Markit iBoxx Index Total Return Yield OAS Bonds Duration

Month YTD Current Month YTD Current Month YTD

€ Overall 0.95% 1.44% 1.12% -0.12% -0.05% 64.7 -9.4 1.1 3,172 6.3

Sovereigns

€ Germany 0.50% 1.21% 0.62% -0.05% -0.10% -0.5 0.5 0.5 52 7.3

€ France 0.86% 1.38% 0.97% -0.10% -0.08% 35.6 -7.9 -0.2 44 7.5

€ Italy 1.63% 4.78% 1.61% -0.21% -0.43% 106.0 -23.3 -46.4 64 6.8

€ Spain 1.48% 1.95% 1.64% -0.20% -0.07% 115.4 -25.3 -5.3 36 6.3

€ Portugal -0.74% 3.16% 2.32% 0.14% -0.06% 189.0 9.6 -22.8 13 6.2

€ Ireland 0.59% 1.86% 0.99% -0.06% 0.01% 59.4 -14.0 -11.9 12 6.3

Corporates

€ Corporates 1.37% -0.53% 1.70% -0.23% 0.35% 151.6 -24.0 39.5 1,700 5.0

€ Corporates A 1.18% -0.44% 1.43% -0.20% 0.31% 123.9 -20.0 35.9 705 5.1

€ Corporates AA 1.03% -0.38% 1.23% -0.16% 0.34% 96.2 -15.5 32.2 174 5.4

€ Corporates AAA 1.00% -0.30% 1.36% -0.13% 0.18% 86.9 -9.6 29.9 6 6.8

€ Corporates BBB 1.67% -0.63% 2.15% -0.28% 0.36% 199.8 -34.8 38.4 815 4.9

€ Financials 1.30% 0.07% 1.68% -0.24% 0.30% 158.5 -30.9 29.5 631 4.5

€ Banks 1.10% 0.20% 1.36% -0.22% 0.21% 132.2 -24.7 24.8 433 4.2

€ Insurance 2.91% -0.06% 3.15% -0.40% 0.50% 286.5 -41.0 45.5 88 6.0

€ Non-Financials 1.43% -0.99% 1.72% -0.23% 0.38% 147.3 -20.5 44.8 1069 5.5

€ Basic Materials 1.29% -5.15% 2.47% -0.23% 1.20% 230.7 -0.5 125.0 80 5.0

€ Consumer Goods 1.90% -1.74% 1.65% -0.31% 0.58% 139.9 -28.9 57.5 213 5.4

€ Consumer Services 1.64% -0.79% 1.78% -0.22% 0.32% 151.7 -24.3 36.7 79 5.9

€ Health Care 1.45% -0.04% 1.48% -0.24% 0.40% 121.0 -25.9 38.4 49 6.0

€ Industrials 0.84% -0.16% 1.41% -0.14% 0.33% 125.7 -12.5 37.6 174 4.8

€ Oil & Gas 1.91% -0.99% 1.84% -0.31% -0.13% 154.3 -30.8 14.5 86 6.0

€ Technology 1.29% -0.45% 1.39% -0.15% 0.23% 99.3 -11.0 37.7 21 7.2

€ Telecommunications 1.37% -0.46% 1.80% -0.21% 0.35% 150.1 -21.0 37.5 120 5.6

€ Utilities 1.23% -0.40% 1.74% -0.19% 0.39% 152.2 -16.7 45.6 247 5.3

€ Covered 0.21% 0.67% 0.62% -0.03% -0.02% 52.5 0.2 5.0 666 4.5

High Yield

€ High Yield 3.24% 2.16% 4.85% -0.73% 0.48% 479.7 -42.1 68.2 555 3.5

€ High Yield B 2.25% 2.15% 7.20% -0.43% 0.07% 721.5 19.5 62.7 192 3.0

€ High Yield BB 3.28% 2.00% 3.92% -0.72% 0.81% 384.5 -69.4 57.5 328 3.8

€ High Yield CCC 7.52% 6.43% 11.71% -2.67% -4.54% 1183.6 184.6 -86.0 33 2.8

Inflation-linked

€ France Inflation-Linked

1.98% 2.80% -0.39% -0.24% -0.37% 0.0 81.6 77.2 19 8.0

€ Germany Inflation-Linked

1.81% 1.47% -0.63% -0.24% -0.38% 0.0 108.3 76.5 6 7.3

€ Italy Inflation-Linked 2.49% 6.09% 0.62% -0.29% -0.64% 0.0 -25.3 -54.2 9 7.8

ABS

Europe ABS 1.62% 6.45% 788

Contingent Convertible

€ Contingent Convertible

2.63% 5.50% 5.80% -0.49% -0.13% 28 4.5

€

https://products.markit.com/indices/data/DataOutput.asp?QueryID=DWIndexAnalytics&isd_index=I12100075&return=TRi&date=04%2E01%2E2013&fixing=EU%5FEOD&family=ib%5FEUR&Level0=EUR



November 2015 9


Table 4: Markit iBoxx £ market snapshot: the month in figures



£ Overall -0.91% 0.38% 2.60% 0.12% 0.13% 38.4 -0.5 2.3 1075 9.8

Sovereigns

£ Gilts -1.23% 0.57% 2.26% 0.13% 0.11% -0.1 -0.1 -0.5 38 10.6

£ Gilts 1-3 -0.07% 0.54% 0.67% 0.07% 0.13% 10.6 1.2 12.8 5 2.0

£ Gilts 3-5 -0.20% 1.28% 1.12% 0.10% 0.09% -0.6 -0.4 -3.8 6 3.9

£ Gilts 5-7 -0.44% 1.10% 1.45% 0.17% 0.12% -7.7 -1.6 -9.3 5 5.5

£ Gilts 7-10 -1.05% 0.71% 1.81% 0.21% 0.20% -5.6 2.1 -4.7 4 7.8

£ Gilts 10-15 -1.28% 0.75% 2.05% 0.17% 0.15% -4.7 0.9 -3.2 2 9.8

£ Gilts 15+ -2.18% 0.30% 2.54% 0.14% 0.10% 1.1 -0.3 0.5 16 17.7

Corporates

£ Corporates 0.18% -0.25% 3.96% 0.03% 0.36% 190.5 -9.6 26.7 707 7.9

£ Corporates A 0.01% -0.51% 3.86% 0.03% 0.31% 174.5 -9.6 23.8 276 8.6

£ Corporates AA -0.33% -0.13% 3.36% 0.07% 0.29% 122.2 -6.2 18.1 73 8.9

£ Corporates AAA -1.07% 0.49% 3.01% 0.09% 0.13% 61.6 -4.0 2.7 5 14.1

£ Corporates BBB 0.45% -0.06% 4.25% 0.00% 0.41% 230.4 -12.8 25.9 353 7.0

£ Banks -0.03% 0.74% 3.88% 0.06% 0.30% 202.1 -5.7 22.8 150 6.3

£ Basic Materials 1.34% -6.76% 4.64% -0.11% 1.34% 265.7 -19.6 123.5 11 7.2

£ Consumer Goods 0.38% -0.28% 3.28% -0.02% 0.56% 158.2 -13.5 43.3 58 5.2

£ Consumer Services -0.04% -0.95% 3.76% 0.06% 0.26% 162.6 -7.1 14.2 61 8.6

£ Financials -0.09% 0.56% 4.04% 0.08% 0.35% 211.4 -4.1 26.6 292 6.8

£ Health Care -0.20% -0.71% 3.72% 0.04% 0.29% 137.0 -9.7 19.8 12 12.2

£ Industrials -0.13% 0.49% 3.71% 0.06% 0.30% 162.2 -8.3 17.6 43 8.4

£ Insurance 0.02% -0.26% 4.94% 0.08% 0.60% 300.5 -2.5 49.8 70 7.0

£ Non-Financials 0.36% -0.78% 3.91% 0.00% 0.36% 179.4 -12.5 26.5 415 8.6

£ Oil & Gas 0.22% 0.38% 3.38% 0.01% -0.72% 144.3 -11.5 -78.4 19 6.8

£ Telecommunications 0.48% -0.86% 4.20% -0.01% 0.48% 208.2 -14.3 38.2 44 8.4

£ Utilities 0.56% -0.84% 4.07% -0.02% 0.41% 189.8 -14.7 32.8 163 9.5

Collateralized

£ Collateralized -0.87% -0.18% 3.51% 0.14% 0.14% 140.9 0.7 4.5 166 8.6

£ Covered -1.04% -0.18% 2.69% 0.18% 0.30% 85.3 5.7 21.2 23 6.9

£ ABS -0.75% -0.44% 3.65% 0.12% -0.38% 154.8 -0.5 -43.1 32 8.6

£ MBS -0.80% 0.76% 3.42% 0.16% 0.26% 146.1 3.0 15.8 42 7.0

£ Housing Associations -0.93% -1.51% 4.03% 0.09% 0.33% 157.5 -4.5 21.7 40 14.2

High Yield

£ High Yield 2.43% 4.67% 5.82% -0.55% -0.51% 426.8 -75.2 -72.4 47 3.4

Inflation-linked

£ Gilt Inflation-Linked -1.68% 0.64% -0.78% 0.07% -0.06% 0.0 325.1 318.7 25 23.1


£ Contingent Convertible 1.29% 2.76% 7.62% -0.13% 0.86% 0.0 0.0 0.0 8 5.6


£




November 2015 10

Table 5: Markit iBoxx $ market snapshot: the month in figures



$ Overall 0.05% 1.13% 2.88% 0.04% 0.14% 82.2 1.5 16.2 5923 6.0

Sovereigns

$ Treasuries -0.35% 1.43% 2.15% 0.09% 0.06% 8.2 4.9 6.2 255 6.0

$ Treasuries 1-3Y -0.08% 0.88% 0.76% 0.10% 0.05% 4.7 1.5 5.0 93 1.8

$ Treasuries 3-5Y -0.36% 2.20% 1.33% 0.14% -0.10% 7.3 4.2 3.4 61 3.7

$ Treasuries 5-7Y -0.49% 2.70% 1.73% 0.12% -0.11% 7.4 3.5 7.8 38 5.5

$ Treasuries 7-10Y -0.57% 2.41% 2.04% 0.10% -0.05% 7.3 4.4 9.0 19 7.5

$ Treasuries 10-15Y -0.71% 2.20% 2.31% 0.10% 0.01% 9.6 8.4 3.1 11 9.3

$ Treasuries 15Y+ -0.53% -0.52% 2.87% 0.05% 0.17% 9.6 6.3 6.4 33 17.3

Corporates

$ Corporates 0.68% 0.56% 4.14% -0.05% 0.28% 203.5 -7.6 31.2 4,653 6.5

$ Corporates A 0.45% 1.22% 3.66% -0.02% 0.20% 160.7 -5.9 24.1 1899 6.1

$ Corporates AA 0.21% 1.35% 3.47% 0.01% 0.23% 138.5 -2.0 24.9 501 6.2

$ Corporates AAA 0.11% 0.15% 3.56% 0.02% 0.30% 123.0 0.2 27.1 58 8.5

$ Corporates BBB 1.06% -0.34% 4.77% -0.09% 0.34% 262.4 -12.0 36.3 2195 7.0

$ Banks 0.63% 2.10% 3.53% -0.06% 0.09% 174.6 -11.7 15.5 986 4.8

$ Basic Materials 1.90% -2.76% 5.39% -0.17% 0.85% 326.9 -18.2 91.8 268 6.8

$ Consumer Goods 0.61% 0.81% 3.79% -0.04% 0.35% 173.0 -8.2 38.7 402 6.1

$ Consumer Services 0.44% -0.71% 4.33% -0.02% 0.49% 204.9 -3.4 49.2 406 8.2

$ Financials 0.57% 2.01% 3.66% -0.05% 0.12% 179.8 -9.4 19.2 1562 5.1

$ Health Care 0.49% 0.43% 3.90% -0.02% 0.35% 167.2 -4.6 35.9 368 7.6

$ Industrials 0.54% 0.53% 3.95% -0.01% 0.37% 174.9 -3.8 36.6 386 7.2

$ Insurance 0.71% 1.23% 4.32% -0.05% 0.28% 209.1 -6.1 28.2 204 7.7

$ Non-Financials 0.74% -0.30% 4.34% -0.05% 0.35% 213.4 -7.0 36.2 3091 7.4

$ Oil & Gas 1.24% -1.16% 4.92% -0.11% 0.20% 275.8 -13.3 24.0 578 7.1

$ Technology 0.13% 0.44% 3.75% 0.03% 0.44% 162.8 -0.7 39.6 199 6.7

$ Telecommunications 1.10% 0.06% 4.65% -0.07% 0.39% 229.7 -10.6 35.8 158 8.5

$ Utilities 0.19% -0.37% 4.37% 0.02% 0.42% 205.4 0.5 42.8 326 8.3

High Yield

$ Liquid High Yield 3.27% -0.46% 7.16% -0.52% 0.81% 544.1 -43.6 102.3 986 4.0

Inflation-linked

$ TIPS Inflation-Linked 0.42% -0.93% 0.80% -0.04% 0.14% 0.0 134.5 162.4 36 8.3

Emerging Markets

$ EM Sovereigns 2.79% 1.47% 5.37% -0.27% 0.17% 324.7 -21.2 34.5 317 7.0

$ EM Corporates 2.77% 3.14% 5.89% -0.49% 0.01% 409.4 -32.2 26.5 1398 4.7

Loans

$ Leveraged Loans -0.13% 0.99% 1210

RMBS

$ US RMBS Seniors 0.89% 9.60% 306

Convertible

$ CVBX 3.73% 0.40% 0.83% -0.67% 0.61% 98 6.7


$ Contingent Convertible 3.89% 5.36% 7.03% -0.62% -0.29% 49 4.9


$




November 2015 11

Key trends: Markit iBoxx € Corporates and € Eurozone

Figure 3: € Total return Figure 4: € Yield

0

0.5

1

1.5

2

2.5

€ Corporates € Eurozone

Figure 5: € Duration Figure 6: € ASW

0

50

100

150

200

250

AS

W (

bp

s)

€ Corporates AAA € Corporates AA

€ Corporates A € Corporates BBB


Key trends: Markit iBoxx € spot and swap curve

€

€

0

1

2

3

4

5

6

7

8


94

96

98

100

102

104

106

108

110



November 2015 12

Figure 7: € Spot curve Figure 8: € Curve steepness

0

20

40

60

80

100

120

140

Bps

2s10s 10s30s

Figure 9: € Spot vs. Swap curve Figure 10: € One month change Spot vs. Swap

-8

-7

-6

-5

-4

-3

-2

-1

0

1

2Y 5Y 10Y 30Y

Bps

Spot Swap


-0.5

0

0.5

1

1.5

2

0 10 20 30 40 50

Yie

ld

Maturity

Yield curve 2015-Oct-30 Yield curve 2015-Sep-30

Swap curve 2015-Oct-30 Swap curve 2015-Sep-30

-0.5

0

0.5

1

1.5

2

0 10 20 30 40 50

Yie

ld

Maturity

2015-Oct-30 2015-Sep-30 2014-Oct-30


November 2015 13

Key trends: Markit iBoxx £ Corporates and £ Gilts

Figure 11: £ Total return Figure 12: £ Yield

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

£ Corporates £ Gilts

Figure 13: £ Duration Figure 14: £ ASW

0

50

100

150

200

250

300

Bp

s

£ Corporates AAA £ Corporates AA

£ Corporates A £ Corporates BBB


£

0

2

4

6

8

10

12


90

95

100

105

110

115

120



November 2015 14

Key trends: Markit iBoxx £ spot and swap curve

Figure 15: £ Spot curve Figure 16: £ Curve steepness

0

20

40

60

80

100

120

140

160

180

Bp

s

2s10s 10s30s

Figure 17: £ Spot vs. Swap curve Figure 18: £ One month change Spot vs. Swap

0

2

4

6

8

10

12

14

16

2Y 5Y 10Y 30Y

Bp

s

Spot Swap


£

0

0.5

1

1.5

2

2.5

3

0 10 20 30 40 50

Yie

ld

Maturity



0

0.5

1

1.5

2

2.5

3

3.5

0 10 20 30 40 50

Yie

ld

Maturity

2015-Oct-30 2015-Sep-30 2014-Oct-30


November 2015 15

Key trends: Markit iBoxx $ Corporates and $ Treasuries

Figure 19: $ Total return Figure 20: $ Yield

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

$ Treasuries $ Corporates

Figure 21: $ Duration Figure 22: $ ASW

0

50

100

150

200

250

300

AS

W (

bp

s)

$ Corporates AAA $ Corporates AA

$ Corporates A $ Corporates BBB


$

5

5.2

5.4

5.6

5.8

6

6.2

6.4

6.6

6.8


95

96

97

98

99

100

101

102

103

104

105

106



November 2015 16

Key trends: Markit iBoxx $ spot and swap curve

Figure 23: $ Spot curve Figure 24: $ Curve steepness

0

50

100

150

200

250

Bp

s

2s10s 10s30s

Figure 25: $ Spot vs. Swap curve Figure 26: $ One month change Spot vs. Swap

-2

0

2

4

6

8

10

12

14

16

2Y 5Y 10Y 30Y

Bp

s

Spot Swap


$

0

0.5

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1.5

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3

3.5

0 5 10 15 20 25 30

Yie

ld

Maturity



0

0.5

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3

3.5

0 5 10 15 20 25 30

Yie

ld

Maturity

2015-Oct-30 2015-Sep-30 2014-Oct-30


November 2015 17

Markit iBoxx € Corporates rebalance movements

Table 6: Index rebalance stats

After rebalance

Changes due to rebalance

Sub-Index Bonds Weight Yield Duration OAS

Bonds Weight Yield Duration OAS

Corporates 1,695 100% 1.71 5.09 152.19

-5 0.0% 0.01 0.05 0.63

Non-Financials 1,064 57.1% 1.72 5.50 147.76

-5 -0.1% 0.01 0.04 0.42

Financials 631 42.9% 1.70 4.53 159.35

0 0.1% 0.01 0.06 0.90

AAA 6 0.5% 1.36 6.83 86.84

0 0.0% 0.00 0.00 0.00

AA 172 12.8% 1.24 5.43 96.23

-2 -0.1% 0.00 0.06 0.08

A 709 43.7% 1.45 5.16 125.25

+4 0.3% 0.02 0.07 1.32

BBB 808 43.0% 2.16 4.89 200.56

-7 -0.2% 0.01 0.02 0.77

1-3y 395 24.3% 0.79 1.86 110.95

+1 0.1% 0.00 0.07 -0.31

3-5y 388 23.0% 1.07 3.77 123.71

+2 0.0% 0.05 0.06 4.14

5-7y 408 24.8% 1.54 5.51 151.02

-1 0.2% 0.01 0.05 0.62

7-10y 342 18.6% 2.03 7.56 169.88

-6 -0.3% 0.01 0.05 0.30

10-15y 131 7.6% 2.40 9.95 173.99

-1 0.0% 0.00 0.02 -0.26

15+ 31 1.7% 2.73 14.07 167.47

0 0.0% 0.00 0.00 0.00

Markit iBoxx £ Corporates rebalance movements


After rebalance




Corporates 703 100% 3.96 7.90 190.91

-4 0.0% 0.00 0.03 0.42

Non-Financials 411 60.2% 3.91 8.60 179.48

-4 -0.1% 0.00 0.04 0.03

Financials 292 39.8% 4.05 6.84 212.54

0 0.1% 0.01 0.01 1.11

AAA 5 0.7% 3.01 14.10 61.55

0 0.0% 0.00 0.00 0.00

AA 73 11.1% 3.36 8.92 122.25

0 -0.1% 0.00 0.00 0.02

A 277 39.6% 3.87 8.55 175.87

+1 0.3% 0.01 -0.03 1.37

BBB 348 48.5% 4.25 7.04 229.66

-5 -0.2% 0.00 0.07 -0.72

1-3y 119 13.9% 2.38 1.85 185.27

-3 -0.2% 0.01 0.04 -0.11

3-5y 117 13.3% 3.03 3.52 197.79

+2 -0.1% -0.03 0.05 -4.97

5-7y 98 13.1% 3.49 5.17 200.64

-4 0.1% 0.06 0.04 5.28

7-10y 94 13.5% 3.70 6.83 191.92

+4 0.6% 0.03 0.08 2.27

10-15y 122 17.7% 3.98 9.18 192.38

-3 -0.3% 0.00 0.02 -0.64

15+ 153 28.5% 4.30 13.86 187.88

0 -0.1% 0.00 0.00 0.26


€

£


November 2015 18

Markit iBoxx $ Corporates rebalance movements


After rebalance




Corporates 4,679 100% 4.14 6.59 203.10

+26 0.0% 0.00 0.06 -0.42

Non-Financials 3,099 62.7% 4.34 7.40 212.61

+8 -0.1% -0.01 0.04 -0.80

Financials 1,580 37.3% 3.67 5.21 180.59

+18 0.1% 0.01 0.09 0.79

AAA 58 1.3% 3.56 8.52 123.02

0 0.0% 0.00 0.00 0.00

AA 508 12.6% 3.46 6.27 137.78

+7 -0.1% -0.01 0.07 -0.75

A 1,896 43.2% 3.67 6.22 160.90

-3 -0.3% 0.01 0.08 0.16

BBB 2,217 43.0% 4.76 7.00 260.98

+22 0.4% -0.01 0.02 -1.42

1-3y 1,093 22.6% 2.00 1.97 123.45

+12 -0.2% 0.04 0.06 2.53

3-5y 980 21.1% 2.70 3.72 142.69

+14 0.4% 0.02 0.07 -0.16

5-7y 645 13.5% 3.41 5.29 174.36

0 -0.1% 0.04 0.08 2.65

7-10y 859 18.2% 3.93 7.21 196.25

-2 -0.2% 0.01 0.06 0.18

10-15y 79 1.9% 4.48 8.84 229.76

-4 0.0% 0.00 0.08 -0.34

15+ 1,023 22.8% 5.03 13.89 238.35

+6 0.0% -0.01 0.04 -1.13


$


November 2015 19

Fixed income market

ETF market activity


November 2015 20

ETF product launch activity Table 25: Europe fixed income ETF launches

Europe

Launch date ETF Name Ticker Provider Type

30/09/2015 db x-trackers Barclays USD Corporate Bond UCITS ETF (DR)

XDGU db x-trackers - Europe

Corporate

Table 26: US fixed income ETF launches

Launch date ETF Name Ticker Provider Type

07/10/2015 Guggenheim BulletShares 2025 Corporate Bond ETF BSCP Guggenheim Funds Corporate

07/10/2015 Guggenheim BulletShares 2023 High Yield Corporate Bond ETF

BSJN Guggenheim Funds Corporate

Fixed income ETF cash flows Table 27: Fixed income ETF cash flows by sector All figures in $ million except otherwise stated

Oct-15

YTD

Type Europe* USA* Asia* Total

Europe* USA* Asia* Total

Broad Market 399 2,635 (6) 3,028

2,466 15,625 46 18,137

Sovereigns 1,772 (1,008) (98) 666

8,287 14,601 (95) 22,793

Sub-Sovereigns 0 601 1 602

0 3,289 (8) 3,282

Corporates IG 763 3,166 0 3,929

6,648 12,047 (17) 18,677

Covered (195) 1 0 (194)

(410) 13 0 (397)

Convertible (8) (64) 0 (72)

(8) (127) 0 (135)

High Yield 764 5,332 0 6,096

3,996 5,051 (2,096) 6,951

Loans 0 0 0 0

0 2 0 2

Asset Backed 0 76 0 76

7 1,733 0 1,740

CDS (5) 0 0 (5)

175 (6) 0 169

Inflation 115 88 2 205

849 1,975 15 2,840

Money Market (123) 0 (4,339) (4,461)

695 0 40,415 41,110

Preferred Stock 0 640 0 640

0 3,790 (31) 3,759

Yield-Curve Strategy 0 0 0 0

0 0 0 0

Total 3,482 11,467 (4,441) 10,509

22,704 57,993 38,230 118,927

* Listing Region Source: Markit ETP Analytics


November 2015 21

Fixed income ETF issuers by AUM

Table 28: Top 10 Fixed income ETF issuers by AUM and regions All figures in $ million except otherwise stated

Europe

US

Issuer AUM Share

Issuer AUM Share

iShares - Europe 73,102 63.4%

iShares - US 187,667 51.2%

db x-trackers - Europe 13,629 11.8%

Vanguard - US 81,084 22.1%

Lyxor 7,544 6.5%

SPDR ETFs - US 39,065 10.7%

Source ETF 6,473 5.6%

PowerShares - US 15,619 4.3%

Amundi ETF 4,941 4.3%

PIMCO ETFs 11,303 3.1%

SPDR ETFs - Europe 3,896 3.4%

Guggenheim Funds 7,393 2.0%

Deka ETFs 2,544 2.2%

Market Vectors 5,602 1.5%

UBS ETF - Europe 1,979 1.7%

ProShares ETFs 4,464 1.2%

Think Capital 764 0.7%

Charles Schwab 4,368 1.2%

EasyETF 175 0.2%

FlexShares 2,552 0.7%

Others 317 0.3%

Others 7,211 2.0%

Total 115,363 100.0%

Total 366,327 100.0%

Asia

Total

Issuer AUM Share

Issuer AUM Share

Fortune SG China ETFs 30,724 56.1%

BlackRock 261,174 48.7%

Yinhua China ETFs 9,162 16.7%

Vanguard 81,254 15.1%

SSgA Asia ETFs 3,019 5.5%

State Street 45,997 8.6%

China Southern China ETFs 1,947 3.6%

Fortune SG Fund Management 30,724 5.7%

Kodex Korea ETFs 1,788 3.3%

PowerShares 15,677 2.9%

E Fund China ETFs 1,159 2.1%

Deutsche Bank 13,688 2.6%

HFT China ETFs 985 1.8%

PIMCO 11,320 2.1%

Tiger Korea 707 1.3%

Yinhua Fund Management 9,162 1.7%

China Merchants China ETFs 630 1.1%

Société Générale 7,544 1.4%

BetaShares Australia ETFs 557 1.0%

Guggenheim Investments 7,393 1.4%

Others 4,128 7.5%

Others 52,564 9.8%

Total 54,807 100.0%

Total 536,497 100.0%

Source: Markit ETP Analytics


November 2015 22

Fixed income ETFs by inflow and outflow

Table 29: Europe top 10 fixed income ETF by inflows during last month All figures in $ million except otherwise stated

ETF Name Ticker Issuer Oct-15 Flows

YTD Flows

iShares Emerging Markets Local Government Bond UCITS ETF IEML BlackRock 422 422

iShares Euro High Yield Corporate Bond UCITS ETF IHYG BlackRock 381 1,389

iShares $ Corporate Bond UCITS ETF LQDE BlackRock 360 1,602

PIMCO Euro Short Maturity Source UCITS ETF PJS1 Source 218 1,344

iShares Italy Government Bond UCITS ETF IITB BlackRock 195 611

iShares $ High Yield Corporate Bond UCITS ETF IHYU BlackRock 193 1,654

iShares Euro Government Bond UCITS ETF IEGA BlackRock 191 622

iShares iBonds Sep 2018 USD Corporate UCITS ETF UI18 BlackRock 189 #N/A

iShares Euro Corporate Bond UCITS ETF IEAC BlackRock 165 1,407

iShares Euro Corporate Bond Large Cap UCITS ETF IBXLQ BlackRock 146 (823)

Table 30: US top 10 fixed income ETF by inflows in last month All figures in $ million except otherwise stated


YTD Flows

SPDR Barclays High Yield Bond ETF JNK State Street

2,773 2,900

iShares iBoxx $ Investment Grade Corporate Bond ETF LQD BlackRock 2,571 6,072

iShares iBoxx $ High Yield Corporate Bond ETF HYG BlackRock 2,447 1,792

iShares Core U.S. Aggregate Bond ETF AGG BlackRock 987 4,452

Vanguard Intermediate-Term Bond ETF BIV Vanguard 629 2,566

Vanguard Intermediate-Term Corporate Bond Index Fund VCIT Vanguard 392 1,424

iShares 7-10 Year Treasury Bond ETF IEF BlackRock 377 2,180

SPDR Barclays Short Term Corporate Bond ETF SCPB State Street

354 520

iShares U.S. Preferred Stock ETF PFF BlackRock 304 2,354

iShares 20+ Year Treasury Bond ETF TLT BlackRock 285 426



November 2015 23

Table 31: Europe top 10 fixed income ETF by outflows during last month All figures in $ million except otherwise stated


YTD Flows

Think iBoxx Government Bond UCITS ETF TGBT ThinkCapital Asset Management

(371) 43

Think iBoxx Corporate Bond UCITS ETF TCBT ThinkCapital Asset Management

(176) 49

iShares $ Treasury Bond 1-3yr UCITS ETF IDBT BlackRock (162) (714)

Think iBoxx AAA-AA Government Bond UCITS ETF TAT ThinkCapital Asset Management

(122) (2)

LYXOR UCITS ETF EURO CORPORATE BOND - C-EUR CRP Société Générale

(84) 7

LYXOR UCITS ETF EURO CASH CSH Société Générale

(83) (123)

SPDR Barclays 1-3 YR US Treasury UCITS ETF SYBW State Street (76) (102)

LYXOR UCITS ETF EUROMTS COVERED BOND AGGREGATE ECB Société Générale

(72) (32)

iShares Euro Corporate Bond 1-5yr UCITS ETF IE15 BlackRock (55) 746

db x-trackers II Short Short iBoxx EURO Sovereigns Eurozone Daily UCITS ETF DXSV Deutsche Bank

(49) 41

Table 32: US top 10 fixed income ETF by outflows during last month All figures in $ million except otherwise stated


YTD Flows

iShares 3-7 Year Treasury Bond ETF IEI BlackRock (586) 1,589

iShares Short Treasury Bond ETF SHV BlackRock (529) 374

iShares 1-3 Year Treasury Bond ETF SHY BlackRock (442) 4,750

PIMCO Enhanced Short Maturity Strategy Fund MINT PIMCO (353) 100

SPDR Barclays 1-3 Month T-Bill ETF BIL State Street

(320) 1,431

iShares Aaa - A Rated Corporate Bond ETF QLTA BlackRock (315) (338)

iShares Floating Rate Bond ETF FLOT BlackRock (272) (263)

iShares 1-3 Year Credit Bond ETF CSJ BlackRock (158) (190)

iShares Agency Bond ETF AGZ BlackRock (114) 67

ProShares UltraShort 20+ Year Treasury ETF TBT ProShares (97) (86)



November 2015 24

Fixed income ETFs by assets

Table 33: Europe top 20 fixed income ETFs by assets All figures in $ million except otherwise stated

ETF Name Ticker

Issuer Type AUM Turnover

iShares Euro Corporate Bond UCITS ETF IEAC iShares - Europe

Investment Grade

6,693 508

iShares Euro Corporate Bond Large Cap UCITS ETF IBXLQ

iShares - Europe

Investment Grade

4,328 128

iShares Euro High Yield Corporate Bond UCITS ETF IHYG iShares - Europe

High Yield 4,151 1,052

iShares J.P. Morgan $ Emerging Markets Bond UCITS ETF IEMB iShares - Europe

Sovereign 3,829 741

iShares $ Corporate Bond UCITS ETF LQDE iShares - Europe

Investment Grade

3,648 394

PIMCO Euro Short Maturity Source UCITS ETF PJS1 Source ETF Broad Market

3,120 29

iShares $ High Yield Corporate Bond UCITS ETF IHYU iShares - Europe

High Yield 2,750 606

db x-trackers II iBoxx EUR Sovereigns Euro Yield Plus UCITS ETF

XY4P db x-trackers - Europe

Sovereign 2,397 64

iShares £ Corporate Bond UCITS ETF SLXX iShares - Europe

Investment Grade

2,200 124

iShares UK Gilts UCITS ETF IGLT iShares - Europe

Government 2,149 359

iShares Euro Aggregate Bond UCITS ETF IEAG iShares - Europe

Broad Market

2,105 107

iShares Emerging Markets Local Government Bond UCITS ETF

IEML iShares - Europe


iShares Euro Corporate Bond ex-Financials UCITS ETF IEXF iShares - Europe

Investment Grade

2,036 18

iShares $ Treasury Bond 1-3yr UCITS ETF IDBT iShares - Europe

Treasury 2,026 132

iShares Euro Corporate Bond 1-5yr UCITS ETF IE15 iShares - Europe

Investment Grade

1,986 297

iShares $ Treasury Bond 7-10yr UCITS ETF IDTM iShares - Europe

Treasury 1,915 150

iShares Euro Government Bond 3-5yr UCITS ETF IBGX iShares - Europe


iShares Euro Government Bond UCITS ETF IEGA iShares - Europe

Treasury 1,801 131

db x-trackers II IBOXX Sovereigns Eurozone Yield + 1-3 ETF UCITS ETF

XYP1 db x-trackers - Europe

Sovereign 1,600 71

Amundi EX AAA Government Bond EuroMTS Investment Grade UCITS ETF

X1G Amundi ETF Government 1,599 354


Table 34: US top 20 fixed income ETFs by assets All figures in $ million except otherwise stated


November 2015 25

ETF Name Ticker Issuer Type AUM Turnover

Vanguard Total Bond Market ETF BND Vanguard - US Broad Market 26,447 986

iShares Core U.S. Aggregate Bond ETF AGG iShares - US Broad Market 25,888 2,192

iShares iBoxx $ Investment Grade Corporate Bond ETF LQD iShares - US Investment Grade

20,966 2,403

Vanguard Short-Term Bond ETF BSV Vanguard - US Broad Market 16,565 485

iShares U.S. Preferred Stock ETF PFF iShares - US Preferred Stock 13,368 698

iShares TIPS Bond ETF TIP iShares - US TIPS 13,351 770

iShares iBoxx $ High Yield Corporate Bond ETF HYG iShares - US High Yield 12,897 7,428

iShares 1-3 Year Treasury Bond ETF SHY iShares - US Treasury 11,943 1,095

iShares 1-3 Year Credit Bond ETF CSJ iShares - US Investment Grade

10,942 254

Vanguard Short-Term Corporate Bond Index Fund VCSH Vanguard - US Investment Grade

10,377 240

SPDR Barclays High Yield Bond ETF JNK SPDR ETFs - US High Yield 10,143 3,113

iShares 7-10 Year Treasury Bond ETF IEF iShares - US Treasury 7,875 2,392

iShares MBS ETF MBB iShares - US Agency MBS 7,458 298

Vanguard Intermediate-Term Bond ETF BIV Vanguard - US Broad Market 6,511 177

iShares Intermediate Credit Bond ETF CIU iShares - US Corporate 6,226 374

iShares 3-7 Year Treasury Bond ETF IEI iShares - US Treasury 5,792 303

iShares 20+ Year Treasury Bond ETF TLT iShares - US Treasury 5,424 18,622

Vanguard Intermediate-Term Corporate Bond Index Fund VCIT Vanguard - US Investment Grade

5,402 144

iShares National AMT-Free Muni Bond ETF MUB iShares - US Municipal 5,178 150

PowerShares Senior Loan Portfolio ETF BKLN PowerShares - US

Credit 4,974 453



November 2015 26

For further information, please visit www.markit.com

Neil Mehta

VP

Fixed Income Commentary

Tel: +44 20 726 0 2298

Email: [email protected]

http://www.markit.com/

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