st Bond returns subdued as market awaits ECB/Fed · Euro BBB corporates have been flat this year on...

Bond returns subdued as market awaits ECB/Fed After a relief rally in October, bond returns were flatter last month as investors await the highly anticipated monetary policy decisions from the ECB and the US Federal Reserve in December.

European sovereign returns were marginally positive last month as opposed to but USD assets

November saw US HY underperform US IG returns by 2.4% as credit risk diverged

European ETFs saw inflows across all risky FI classes and Inflation linked bonds.

Market overview Among developed sovereigns, European bond returns led the charge in November, albeit by a slim margin. UK gilts were the best performing, returning 1.0% on a total return basis after Bank of England governor Mark Carney stated that he expected interest rates to remain lower for longer. European sovereigns gained further traction in the run up to the December 3rd ECB monetary policy meeting, after council members bolstered dovish rhetoric last month. German bunds returned 0.2% last month as yields subsequently tightened. Periphery European sovereigns have also benefitted from heightened expectations of further monetary stimulus in the region, with credit spreads tightening across the board. Italian sovereign bonds returned another 0.9% last month to reach 5.6% for the year to date. Conversely, US dollar denominated sovereigns performed negatively with treasuries returning -0.5%, and USD EM Sovs returning -0.4%, as investors buckle up for an impending interest rate hike. US high yield (HY) decoupled from US investment grade (IG) in November, with the returns differential between the two assets reaching 2.2% as investors traded up the credit quality spectrum. Idiosyncratic risk premium and another fall in commodity prices weighed in on US HY, with $CCC corporate credit spreads hitting new post-financial crisis highs.

Elsewhere, European and UK corporates extended year to date gains, with UK HY now up 5.5%. Limited supply and healthy coupon returns have helped bolster returns in the small and liquid market. In emerging markets, Russian sovereign bonds returned 2.2% last month, making it 32.2% for the year so far. Although Russia remains in severe recession and under threat from further oil price deterioration, easing geopolitical tensions and third quarter GDP numbers suggested the worst may be over. Brazilian sovereigns also enjoyed a positive month in terms of investor returns (1.2%), as the country recovers from the damaging effects of political corruption and lower global trade. Inflation-linked bond returns ticked up in November in market expectation that inflation will pick up as aggressive monetary stimulus in Europe and the transitory effects of low oil prices pass. In the US IG corporate bond market, the Basic Materials sector spread widened 11bps, making it the stand out underperformer. $Banks strengthened further, a potential beneficiary of higher interest rates and tight regulation. In Europe and the UK, financials led the charge with the Banking, Insurance and Financial services sector seeing the best returns in November.

Markit iBoxx monthly monitor

Issue 8, December 2015 Data as of November 31

st, 2015

Markit iBoxx fixed income monthly market monitor \ December 2015

December 2015 2

Fixed income ETFs European and US fixed income ETFs saw inflows in November with IG corporates seeing

the bulk of the new money. Ever growing expectations of strong stimulus in Europe has seen investors pile into European corporates which have seen inflows of $904m in IG and $802 in HY. Inflation linked ETFs in Europe also saw $177m of net inflows. The diverging credit risk among US HY in November was also reflected in ETF flows. US IG ETFs saw positive inflows, while US HY ETFs shed $733m of AUM. US convertible bond ETF inflows also saw a noticeable up tick, with $111m of inflows in November. Among the new ETF launches, Amundi launched several ETFs including the Amundi ETF BBB Euro Corporate Investment Grade UCITS ETF. Euro BBB corporates have been flat this year on a total return basis but may benefit from a region looking to spur growth.


December 2015 3

Fixed income market

Facts and figures


December 2015 4

Figure 1: Global fixed income market YTD total returns

1.0%1.6%1.4%1.7%

5.6%

2.9%

0.4%

-2.8%

0.2%

2.7%1.6%

5.5%

1.1%2.9%3.0%

32.2%

5.3%7.3%

-0.7%

4.6%

-0.7%

1.8%2.0%

-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

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SD

Bra

zil

Ru

ssia

Ch

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Ind

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Tu

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Me

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UK

Ge

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Figure 2: Global fixed income market MTD total returns

-0.5%

1.0%

0.2%0.3%

0.8%0.9%

-0.2%

-2.4%

0.7%0.6%

1.8%

0.8%

-0.4%-0.3%

1.2%

2.2%

0.2%

-0.3%-0.6%

0.0%

0.1%

1.2%

0.5%

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

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

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Ind

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Tu

rke

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Me

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UK

Ge

rma

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Source: Markit iBoxx Data

Sovereigns

Corporates Emerging Markets Inflation Sovereigns

Sovereigns Corporates Emerging Markets Inflation

YTD

Nov


December 2015

5

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 0.85 -0.13 0.88 0.84 0.70 0.75 0.65 0.60 -0.34 0.64 0.20 0.11 -0.46 -0.30

Corp IG 0.85 1.00 0.07 0.83 0.80 0.67 0.73 0.60 0.57 -0.36 0.60 0.12 0.09 -0.39 -0.21

HY -0.13 0.07 1.00 0.78 0.76 0.68 0.65 0.48 0.49 -0.33 0.56 0.20 0.24 -0.33 -0.05

GBP

Gilts 0.88 0.83 0.78 1.00 0.98 0.09 0.83 0.74 0.69 -0.13 0.69 0.35 0.17 -0.30 -0.36

Corp IG 0.84 0.80 0.76 0.98 1.00 0.20 0.81 0.71 0.66 -0.08 0.69 0.40 0.21 -0.30 -0.33

HY 0.70 0.67 0.68 0.09 0.20 1.00 -0.09 0.55 0.51 0.09 0.61 0.50 0.27 -0.19 -0.15

IL 0.75 0.73 0.65 0.83 0.81 -0.09 1.00 0.70 0.64 -0.22 0.50 0.10 -0.03 -0.17 -0.48

USD

TSY 0.65 0.60 0.48 0.74 0.71 0.55 0.70 1.00 0.96 0.05 0.80 0.32 0.18 -0.28 -0.51

Corp IG 0.60 0.57 0.49 0.69 0.66 0.51 0.64 0.96 1.00 0.08 0.79 0.35 0.30 -0.23 -0.31

HY -0.34 -0.36 -0.33 -0.13 -0.08 0.09 -0.22 0.05 0.08 1.00 0.11 0.47 0.35 0.52 0.26

TIPS 0.64 0.60 0.56 0.69 0.69 0.61 0.50 0.80 0.79 0.11 1.00 0.56 0.42 -0.29 -0.18

EM Sov 0.20 0.12 0.20 0.35 0.40 0.50 0.10 0.32 0.35 0.47 0.56 1.00 0.86 0.00 0.18

EM Corp 0.11 0.09 0.24 0.17 0.21 0.27 -0.03 0.18 0.30 0.35 0.42 0.86 1.00 0.04 0.40

Loans -0.46 -0.39 -0.33 -0.30 -0.30 -0.19 -0.17 -0.28 -0.23 0.52 -0.29 0.00 0.04 1.00 0.48

CVBX -0.30 -0.21 -0.05 -0.36 -0.33 -0.15 -0.48 -0.51 -0.31 0.26 -0.18 0.18 0.40 0.48 1.00



December 2015 6

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 0.08 0.64 0.62 0.47 0.51 0.09 0.08 -0.26 0.28 0.13 0.03 -0.12 -0.07

Corp IG 0.81 1.00 0.28 0.57 0.58 0.50 0.43 0.05 0.05 -0.21 0.21 0.10 0.03 -0.09 -0.09

HY 0.08 0.28 1.00 0.45 0.49 0.54 0.30 -0.02 -0.01 -0.08 0.08 0.12 0.08 -0.02 -0.04

GBP

Gilts 0.64 0.57 0.45 1.00 0.96 -0.14 0.83 0.29 0.29 -0.16 0.45 0.17 0.11 -0.15 -0.01

Corp IG 0.62 0.58 0.49 0.96 1.00 0.04 0.80 0.25 0.27 -0.05 0.38 0.21 0.16 -0.09 0.05

HY 0.47 0.50 0.54 -0.14 0.04 1.00 -0.12 0.08 0.11 0.18 0.09 0.22 0.23 0.06 0.12

IL 0.51 0.43 0.30 0.83 0.80 -0.12 1.00 0.31 0.31 -0.15 0.53 0.13 0.09 -0.18 -0.03

USD

TSY 0.09 0.05 -0.02 0.29 0.25 0.08 0.31 1.00 0.94 0.02 0.53 -0.05 0.18 -0.32 -0.11

Corp IG 0.08 0.05 -0.01 0.29 0.27 0.11 0.31 0.94 1.00 0.14 0.54 0.14 0.40 -0.13 0.07

HY -0.26 -0.21 -0.08 -0.16 -0.05 0.18 -0.15 0.02 0.14 1.00 -0.08 0.29 0.41 0.44 0.37

TIPS 0.28 0.21 0.08 0.45 0.38 0.09 0.53 0.53 0.54 -0.08 1.00 0.18 0.23 -0.14 0.00

EM Sov 0.13 0.10 0.12 0.17 0.21 0.22 0.13 -0.05 0.14 0.29 0.18 1.00 0.83 0.36 0.54

EM Corp 0.03 0.03 0.08 0.11 0.16 0.23 0.09 0.18 0.40 0.41 0.23 0.83 1.00 0.44 0.58

Loans -0.12 -0.09 -0.02 -0.15 -0.09 0.06 -0.18 -0.32 -0.13 0.44 -0.14 0.36 0.44 1.00 0.48

CVBX -0.07 -0.09 -0.04 -0.01 0.05 0.12 -0.03 -0.11 0.07 0.37 0.00 0.54 0.58 0.48 1.00



December 2015

7

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 0.50% 1.95% 1.05% -0.06% -0.11% 63.2 -1.5 -0.4 3,190 6.3

Sovereigns

€ Germany 0.18% 1.40% 0.60% -0.02% -0.12% 0.5 1.1 1.5 51 7.2

€ France 0.31% 1.70% 0.94% -0.03% -0.11% 35.6 0.0 -0.2 44 7.5

€ Italy 0.75% 5.58% 1.51% -0.10% -0.53% 100.1 -5.8 -52.3 65 6.8

€ Spain 0.89% 2.86% 1.52% -0.12% -0.19% 107.9 -7.5 -12.8 36 6.3

€ Portugal 1.35% 4.55% 2.17% -0.15% -0.21% 177.6 -11.4 -34.2 12 6.4

€ Ireland 0.74% 2.62% 0.90% -0.09% -0.08% 55.3 -4.1 -16.0 12 6.3

Corporates

€ Corporates 0.72% 0.19% 1.60% -0.11% 0.24% 149.3 -2.3 37.2 1,695 5.0

€ Corporates A 0.75% 0.31% 1.32% -0.11% 0.20% 121.6 -2.3 33.5 709 5.1

€ Corporates AA 0.68% 0.31% 1.13% -0.10% 0.23% 92.9 -3.2 29.0 172 5.4

€ Corporates AAA 0.93% 0.63% 1.24% -0.12% 0.06% 79.1 -7.7 22.2 6 6.8

€ Corporates BBB 0.69% 0.06% 2.05% -0.10% 0.26% 198.8 -1.0 37.3 808 4.8

€ Financials 0.87% 0.95% 1.53% -0.15% 0.15% 152.8 -5.7 23.8 631 4.5

€ Banks 0.79% 1.00% 1.20% -0.16% 0.05% 125.8 -6.3 18.5 431 4.2

€ Insurance 1.41% 1.35% 3.00% -0.15% 0.35% 279.0 -7.5 38.1 89 6.0

€ Non-Financials 0.61% -0.38% 1.63% -0.08% 0.30% 147.1 -0.2 44.6 1064 5.4

€ Basic Materials -0.12% -5.26% 2.61% 0.14% 1.34% 254.2 23.4 148.5 82 5.0

€ Consumer Goods 0.73% -1.02% 1.55% -0.11% 0.48% 137.4 -2.6 55.0 211 5.4

€ Consumer Services 0.44% -0.35% 1.72% -0.06% 0.26% 155.0 3.3 40.0 79 5.8

€ Health Care 0.72% 0.68% 1.38% -0.10% 0.30% 119.4 -1.6 36.8 49 5.9

€ Industrials 0.63% 0.48% 1.30% -0.10% 0.23% 124.7 -1.0 36.5 171 4.8

€ Oil & Gas 0.72% -0.27% 1.75% -0.10% -0.23% 152.0 -2.3 12.2 86 5.9

€ Technology 0.92% 0.47% 1.28% -0.11% 0.12% 95.4 -4.0 33.8 21 7.2

€ Telecommunications 0.58% 0.13% 1.73% -0.08% 0.28% 149.8 -0.3 37.2 121 5.6

€ Utilities 0.66% 0.26% 1.61% -0.12% 0.26% 148.2 -4.0 41.6 244 5.3

€ Covered 0.45% 1.13% 0.54% -0.08% -0.10% 53.5 1.0 6.0 680 4.6

High Yield

€ High Yield 0.57% 2.74% 4.62% -0.23% 0.25% 470.7 -9.2 59.2 554 3.5

€ High Yield B -0.20% 1.95% 6.65% -0.55% -0.47% 675.5 -45.8 16.7 195 2.9

€ High Yield BB 0.79% 2.82% 3.76% -0.16% 0.65% 379.8 -4.8 52.7 323 3.7

€ High Yield CCC 1.41% 7.94% 10.54% -1.17% -5.71% 1068.7 -115.1 -200.9 34 2.9

Inflation-linked

€ France Inflation-Linked

1.01% 3.84% -0.52% -0.13% -0.50% 0.0 0.0 77.2 19 7.9

€ Germany Inflation-Linked

0.49% 1.97% -0.69% -0.06% -0.44% 0.0 0.0 76.5 6 7.4

€ Italy Inflation-Linked 1.04% 7.20% 0.51% -0.11% -0.75% 0.0 0.0 -54.2 10 8.0

ABS

Europe ABS 1.62% 6.45% 788

Contingent Convertible

€ Contingent Convertible

0.95% 6.50% 5.69% -0.11% -0.25% 28 4.4

€

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



December 2015 8


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



£ Overall 1.14% 1.54% 2.50% -0.09% 0.04% 35.7 -2.7 -0.4 1073 9.9

Sovereigns

£ Gilts 1.01% 1.59% 2.19% -0.07% 0.04% -0.1 0.0 -0.5 39 10.8

£ Gilts 1-3 0.10% 0.65% 0.64% -0.02% 0.10% 13.0 2.3 15.2 5 1.9

£ Gilts 3-5 0.30% 1.59% 1.06% -0.06% 0.03% -0.9 -0.3 -4.0 6 3.8

£ Gilts 5-7 0.49% 1.60% 1.38% -0.07% 0.05% -8.7 -1.0 -10.3 5 5.5

£ Gilts 7-10 0.80% 1.53% 1.73% -0.08% 0.12% -8.2 -2.5 -7.2 4 7.8

£ Gilts 10-15 0.85% 1.61% 1.98% -0.07% 0.08% -5.5 -0.8 -4.0 2 9.9

£ Gilts 15+ 1.73% 2.04% 2.45% -0.09% 0.01% 1.5 0.3 0.8 17 18.0

Corporates

£ Corporates 1.83% 1.59% 3.77% -0.19% 0.17% 177.5 -13.0 13.7 703 7.9

£ Corporates A 2.16% 1.65% 3.66% -0.20% 0.11% 160.8 -13.7 10.1 277 8.6

£ Corporates AA 1.73% 1.61% 3.20% -0.16% 0.13% 112.2 -10.1 8.0 73 9.0

£ Corporates AAA 2.38% 2.88% 2.86% -0.15% -0.02% 54.7 -6.9 -4.2 5 14.4

£ Corporates BBB 1.58% 1.53% 4.07% -0.18% 0.23% 217.2 -13.2 12.8 348 7.1

£ Banks 2.22% 2.99% 3.59% -0.29% 0.00% 177.0 -25.1 -2.3 150 6.4

£ Basic Materials 1.14% -5.69% 4.64% 0.00% 1.34% 274.5 8.8 132.3 12 7.0

£ Consumer Goods 1.15% 0.88% 3.11% -0.17% 0.39% 146.1 -12.1 31.2 58 5.2

£ Consumer Services 1.52% 0.57% 3.62% -0.13% 0.12% 155.1 -7.6 6.6 58 8.8

£ Financials 2.11% 2.69% 3.79% -0.25% 0.10% 191.7 -19.8 6.8 292 6.9

£ Health Care 2.13% 1.41% 3.57% -0.15% 0.14% 128.9 -8.1 11.7 12 12.3

£ Industrials 1.79% 2.30% 3.53% -0.18% 0.12% 150.2 -12.0 5.6 43 8.5

£ Insurance 2.25% 1.99% 4.69% -0.25% 0.35% 280.0 -20.5 29.4 69 7.1

£ Non-Financials 1.65% 0.87% 3.76% -0.15% 0.21% 170.0 -9.5 17.0 411 8.7

£ Oil & Gas 1.21% 1.60% 3.24% -0.14% -0.86% 135.8 -8.5 -86.9 19 6.8

£ Telecommunications 1.90% 1.04% 4.02% -0.19% 0.30% 195.4 -12.9 25.4 44 8.5

£ Utilities 1.75% 0.91% 3.91% -0.16% 0.25% 180.0 -9.8 23.0 161 9.6

Collateralized

£ Collateralized 0.97% 0.80% 3.44% -0.07% 0.08% 139.3 -1.6 2.9 167 8.8

£ Covered 0.78% 0.61% 2.61% -0.08% 0.22% 82.6 -2.7 18.5 23 6.9

£ ABS 1.08% 0.65% 3.56% -0.09% -0.47% 151.5 -3.3 -46.4 32 8.6

£ MBS 0.61% 1.37% 3.38% -0.04% 0.23% 147.1 0.9 16.8 41 7.2

£ Housing Associations 2.06% 0.54% 3.90% -0.13% 0.20% 152.0 -5.5 16.2 42 14.4

High Yield

£ High Yield 0.81% 5.53% 5.75% -0.07% -0.58% 429.0 1.9 -70.2 46 3.5

Inflation-linked

£ Gilt Inflation-Linked 1.16% 1.81% -0.84% -0.05% -0.11% 0.0 0.0 318.7 25 23.1


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


£




December 2015

9

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



$ Overall -0.37% 0.76% 2.99% 0.10% 0.25% 76.3 -5.9 10.3 5939 6.0

Sovereigns

$ Treasuries -0.45% 0.97% 2.26% 0.11% 0.17% 2.6 -5.6 0.6 252 6.0

$ Treasuries 1-3Y -0.27% 0.61% 0.97% 0.21% 0.26% 2.5 -2.2 2.7 91 1.8

$ Treasuries 3-5Y -0.39% 1.80% 1.48% 0.15% 0.05% 1.0 -6.3 -2.8 62 3.7

$ Treasuries 5-7Y -0.51% 2.18% 1.86% 0.13% 0.03% 1.2 -6.3 1.5 37 5.5

$ Treasuries 7-10Y -0.48% 1.93% 2.13% 0.10% 0.05% 0.6 -6.7 2.3 18 7.5

$ Treasuries 10-15Y -0.43% 1.77% 2.38% 0.07% 0.08% 4.5 -5.1 -2.0 11 9.3

$ Treasuries 15Y+ -0.85% -1.36% 2.93% 0.07% 0.24% 3.9 -5.6 0.8 33 17.3

Corporates

$ Corporates -0.21% 0.36% 4.21% 0.07% 0.35% 194.9 -8.6 22.7 4,679 6.5

$ Corporates A 0.04% 1.26% 3.71% 0.05% 0.25% 149.1 -11.6 12.5 1896 6.1

$ Corporates AA -0.08% 1.27% 3.51% 0.05% 0.28% 127.6 -11.0 14.0 508 6.2

$ Corporates AAA 0.08% 0.24% 3.59% 0.03% 0.32% 110.8 -12.2 14.9 58 8.5

$ Corporates BBB -0.50% -0.83% 4.87% 0.10% 0.43% 257.1 -5.3 31.0 2217 6.9

$ Banks 0.10% 2.20% 3.58% 0.05% 0.14% 161.7 -13.0 2.6 999 4.8

$ Basic Materials -2.50% -5.18% 5.64% 0.25% 1.11% 338.2 11.3 103.1 257 6.7

$ Consumer Goods -0.08% 0.73% 3.84% 0.05% 0.41% 162.0 -11.0 27.8 406 6.1

$ Consumer Services -0.02% -0.72% 4.38% 0.04% 0.53% 194.6 -10.3 38.9 408 8.2

$ Financials 0.05% 2.07% 3.72% 0.06% 0.18% 168.2 -11.6 7.7 1580 5.1

$ Health Care 0.15% 0.59% 3.92% 0.02% 0.38% 154.4 -12.8 23.1 368 7.5

$ Industrials -0.19% 0.34% 4.02% 0.07% 0.44% 166.5 -8.4 28.2 390 7.2

$ Insurance -0.18% 1.05% 4.39% 0.07% 0.36% 202.7 -6.4 21.8 207 7.6

$ Non-Financials -0.36% -0.65% 4.42% 0.08% 0.43% 206.2 -7.2 29.1 3099 7.3

$ Oil & Gas -0.79% -1.93% 5.09% 0.17% 0.36% 277.6 1.7 25.8 579 7.1

$ Technology -0.01% 0.44% 3.86% 0.11% 0.56% 158.7 -4.2 35.4 204 6.8

$ Telecommunications 0.31% 0.38% 4.66% 0.01% 0.41% 216.5 -13.3 22.6 158 8.5

$ Utilities -0.62% -0.98% 4.48% 0.11% 0.54% 202.3 -3.1 39.7 329 8.3

High Yield

$ Liquid High Yield -2.38% -2.81% 7.70% 0.53% 1.34% 581.7 37.5 139.9 991 4.2

Inflation-linked

$ TIPS Inflation-Linked 0.15% -0.68% 0.78% 0.00% 0.13% 0.0 0.0 162.4 36 8.4

Emerging Markets

$ EM Sovereigns -0.40% 1.07% 5.55% 0.19% 0.36% 328.1 3.4 38.0 321 6.9

$ EM Corporates -0.27% 2.86% 6.06% 0.16% 0.17% 408.4 -1.1 25.5 1385 4.7

Loans

$ Leveraged Loans -1.01% -0.02% 1225

RMBS

$ US RMBS Seniors 0.42% 10.06% 306

Convertible

$ CVBX 0.24% 1.32% 0.64% 0.64% 0.42% 98 6.6


$ Contingent Convertible 0.75% 6.15% 6.99% -0.04% -0.32% 49 4.8


$




December 2015 10

Key trends: Markit iBoxx € Corporates and € Eurozone

Total return Figure 4: € Yield

0

0.5

1

1.5

2

2.5

€ Corporates € Eurozone

Duration

0

50

100

150

200

250

AS

W (

bp

s)

€ Corporates AAA € Corporates AA

€ Corporates A € Corporates BBB


€

0

1

2

3

4

5

6

7

8


94

96

98

100

102

104

106

108



December 2015 11

Key trends: Markit iBoxx € spot and swap curve

Spot curve

Curve steepness

0

20

40

60

80

100

120

140

Bps

2s10s 10s30s

One month change Spot vs. Swap

-15

-10

-5

0

5

10

2Y 5Y 10Y 30Y

Bps

Spot Swap


€

-0.5

0

0.5

1

1.5

2

0 10 20 30 40 50

Yie

ldMaturity

Yield curve 2015-Nov-30 Yield curve 2015-Oct-31

Swap curve 2015-Nov-30 Swap curve 2015-Oct-31

-0.5

0

0.5

1

1.5

2

0 10 20 30 40 50

Yie

ld

Maturity

2015-Nov-30 2015-Oct-31 2014-Dec-01


December 2015 12

Key trends: Markit iBoxx £ Corporates and £ Gilts

Total return Figure 12: £ Yield

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

£ Corporates £ Gilts

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



December 2015 13

Key trends: Markit iBoxx £ spot and swap curve

Spot curve Figure 16: £ Curve steepness

0

20

40

60

80

100

120

140

160

180

Bp

s

2s10s 10s30s

Spot vs. Swap curve

-18

-16

-14

-12

-10

-8

-6

-4

-2

0

2Y 5Y 10Y 30Y

Bp

s

Spot Swap


£

0

0.5

1

1.5

2

2.5

3

0 10 20 30 40 50Y

ield

Maturity



0

0.5

1

1.5

2

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3

0 10 20 30 40 50

Yie

ld

Maturity

2015-Nov-30 2015-Oct-31 2014-Dec-01


December 2015

14

Key trends: Markit iBoxx $ Corporates and $ Treasuries

Total return

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

$ Treasuries $ Corporates

0

50

100

150

200

250

300

AS

W (

bp

s)

$ Corporates AAA $ Corporates AA

$ Corporates A $ Corporates BBB


$

5.2

5.4

5.6

5.8

6

6.2

6.4

6.6

6.8


97

98

99

100

101

102

103

104

105



December 2015 15

Key trends: Markit iBoxx $ spot and swap curve

0

50

100

150

200

250

Bp

s

2s10s 10s30s

0

5

10

15

20

25

2Y 5Y 10Y 30Y

Bp

s

Spot Swap

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0 5 10 15 20 25 30

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ld

Maturity



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0 5 10 15 20 25 30

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ld

Maturity

2015-Nov-30 2015-Oct-31 2014-Dec-01

$


December 2015

16

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 1,727 100% 1.60 5.09 149.30

+32 0.0% 0.00 0.07 0.02

Non-Financials 1,087 57.3% 1.63 5.50 146.69

+23 0.2% 0.00 0.07 -0.42

Financials 640 42.7% 1.54 4.54 153.54

+9 -0.2% 0.01 0.07 0.76

AAA 6 0.5% 1.24 6.82 79.12

0 0.0% 0.00 0.00 0.00

AA 171 12.4% 1.12 5.48 91.93

-1 -0.3% -0.01 0.11 -0.97

A 714 43.5% 1.32 5.14 121.71

+5 -0.2% 0.00 0.04 0.10

BBB 836 43.6% 2.04 4.92 197.25

+28 0.6% -0.01 0.10 -1.52

1-3y 399 24.0% 0.68 1.86 105.16

+4 -0.2% 0.03 0.08 2.77

3-5y 406 23.6% 0.95 3.81 122.12

+18 0.7% 0.02 0.11 1.32

5-7y 409 24.3% 1.42 5.52 151.71

+1 -0.6% 0.02 0.08 0.86

7-10y 353 19.1% 1.92 7.54 167.90

+11 0.4% 0.02 0.06 0.65

10-15y 129 7.3% 2.28 9.95 164.45

-2 -0.3% -0.03 0.05 -3.37

15+ 31 1.7% 2.72 14.02 163.05

0 0.0% 0.00 0.00 0.00

Markit iBoxx £ Corporates rebalance movements


After rebalance




Corporates 702 100% 3.78 8.01 178.00

-1 0.0% 0.01 0.06 0.51

Non-Financials 409 60.1% 3.76 8.74 169.87

-2 0.1% 0.00 0.08 -0.12

Financials 293 39.9% 3.81 6.91 193.47

+1 -0.1% 0.02 0.02 1.81

AAA 5 0.7% 2.86 14.40 54.66

0 0.0% 0.00 0.00 0.00

AA 73 11.1% 3.20 9.03 110.89

0 0.0% -0.01 0.07 -1.28

A 275 39.9% 3.66 8.61 160.70

-2 0.1% 0.00 -0.02 -0.08

BBB 349 48.3% 4.09 7.18 218.28

+1 -0.1% 0.02 0.12 1.05

1-3y 120 13.8% 2.21 1.85 170.60

+1 0.1% 0.02 0.08 -0.75

3-5y 120 13.6% 2.85 3.55 181.48

+3 0.4% -0.01 0.09 -3.83

5-7y 93 12.7% 3.34 5.19 188.67

-5 -0.3% 0.04 0.07 1.98

7-10y 95 13.2% 3.53 6.82 180.78

+1 -0.2% 0.05 0.04 4.52

10-15y 120 17.5% 3.81 9.21 180.64

-2 -0.1% 0.00 0.04 0.04

15+ 154 29.2% 4.10 14.03 174.64

+1 0.2% 0.00 0.03 0.17


€

£


December 2015 17

Markit iBoxx $ Corporates rebalance movements


After rebalance




Corporates 4,733 100% 4.20 6.57 192.90

+54 0.0% -0.02 0.06 -2.03

Non-Financials 3,155 63.3% 4.39 7.34 203.16

+56 0.7% -0.03 0.01 -3.08

Financials 1,578 36.7% 3.73 5.25 168.37

-2 -0.7% 0.01 0.10 0.14

AAA 66 1.5% 3.61 8.68 111.93

+8 0.3% 0.03 0.21 1.11

AA 517 12.7% 3.48 6.21 124.79

+9 0.1% -0.03 0.00 -2.78

A 1,902 43.0% 3.72 6.20 149.30

+6 -0.3% 0.00 0.05 0.17

BBB 2,248 42.8% 4.84 6.98 253.49

+31 0.0% -0.03 0.07 -3.61

1-3y 1,116 22.8% 2.13 1.96 113.42

+23 0.2% 0.01 0.07 -1.51

3-5y 994 21.2% 2.79 3.73 129.49

+14 0.0% 0.01 0.08 -1.54

5-7y 655 13.5% 3.52 5.33 165.10

+10 0.0% 0.02 0.09 0.54

7-10y 852 17.9% 3.98 7.23 184.35

-7 -0.3% -0.01 0.08 -2.12

10-15y 80 1.9% 4.53 8.78 222.53

+1 0.0% 0.00 0.01 -0.42

15+ 1,036 22.8% 5.07 13.89 229.47

+13 0.0% -0.02 0.05 -2.07


$


December 2015 18

Fixed income market

ETF market activity


December 2015 19

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

Launch date ETF Name Ticker Provider Type

02/11/2015 Deka Eurozone Rendite Plus 1-10 UCITS ETF ELFD Deka ETFs Government

03/11/2015 Amundi ETF Euro Corporates UCITS ETF CC4D Amundi ETF Corporate

03/11/2015 Amundi Euro High Yield Liquid Bond IBOXX UCITS ETF AHYD Amundi ETF Corporate

10/11/2015 Amundi ETF Govt Bond EuroMTS Broad Investment Grade 1-3 UCITS ETF

X1GD Amundi ETF Government

10/11/2015 Amundi ETF BBB Euro Corporate Investment Grade UCITS ETF

CBBB Amundi ETF Corporate

23/11/2015 db x-trackers iBoxx Eurozone Sovereigns Quality Weighted UCITS ETF (DR)

XESQ Deutsche X-trackers Broad Market

Table 26: US fixed income ETF launches

Launch date ETF Name Ticker Provider Type

10/11/2015 iShares Core International Aggregate Bond Fund IAGG iShares - US Broad Market

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

Nov-15

YTD

Type Europe* USA* Asia* Total

Europe* USA* Asia* Total

Broad Market 14 3,121 6 3,142

2,480 18,747 52 21,278

Sovereigns (1,149) (3,602) 185 (4,566)

7,151 11,016 90 18,257

Sub-Sovereigns 0 403 (15) 389

0 3,693 (22) 3,670

Corporates IG 904 408 57 1,368

7,549 12,455 39 20,044

Covered (3) 0 0 (3)

(413) 13 0 (400)

Convertible 17 111 0 127

8 (17) 0 (8)

High Yield 802 (733) 0 70

4,959 4,318 (2,096) 7,182

Loans 0 0 0 0

0 2 0 2

Asset Backed 0 83 0 83

7 1,816 0 1,823

CDS 11 2 0 13

186 (4) 0 182

Inflation 177 35 0 212

1,026 2,010 15 3,052

Money Market (520) 0 (4,859) (5,379)

172 0 35,516 35,688

Preferred Stock 0 768 28 797

0 4,558 (2) 4,556

Yield-Curve Strategy 0 0 0 0

0 0 0 0

Total 252 597 (4,598) (3,749)

23,126 58,607 33,592 115,325

* Listing Region Source: Markit ETP Analytics


December 2015 20

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 73,125 62.6%

iShares - US 186,824 51.3%

db x-trackers - Europe 13,834 11.8%

Vanguard - US 82,118 22.5%

Lyxor 7,047 6.0%

SPDR ETFs - US 37,301 10.2%

Source ETF 6,203 5.3%

PowerShares - US 15,349 4.2%

Amundi ETF 4,883 4.2%

PIMCO ETFs 11,044 3.0%

SPDR ETFs - Europe 3,915 3.4%

Guggenheim Funds 7,368 2.0%

Deka ETFs 2,433 2.1%

Market Vectors 5,568 1.5%

ComStage ETFs 2,301 2.0%

ProShares ETFs 4,477 1.2%

UBS ETF - Europe 1,973 1.7%

Charles Schwab 4,289 1.2%

Think Capital 611 0.5%

FlexShares 2,520 0.7%

Others 509 0.4%

Others 7,566 2.1%

Total 116,835 100.0%

Total 364,426 100.0%

Asia

Total

Issuer AUM Share

Issuer AUM Share

Fortune SG China ETFs 25,066 50.4%

BlackRock 260,357 49.0%

Yinhua China ETFs 8,263 16.6%

Vanguard 82,293 15.5%

SSgA Asia ETFs 2,985 6.0%

State Street 44,220 8.3%

E Fund China ETFs 2,709 5.5%

Fortune SG Fund Management 25,066 4.7%

China Southern China ETFs 1,751 3.5%

PowerShares 15,517 2.9%

Kodex Korea ETFs 1,723 3.5%

Deutsche Bank 13,966 2.6%

HFT China ETFs 970 2.0%

PIMCO 11,062 2.1%

Tiger Korea 687 1.4%

Yinhua Fund Management 8,263 1.6%

BetaShares Australia ETFs 570 1.1%

Guggenheim Investments 7,368 1.4%

China Merchants China ETFs 509 1.0%

Société Générale 7,047 1.3%

Others 4,465 9.0%

Others 55,799 10.5%

Total 49,698 100.0%

Total 530,959 100.0%

Source: Markit ETP Analytics


December 2015 21

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 Nov-15 Flows

YTD Flows

iShares Euro High Yield Corporate Bond UCITS ETF IHYG BlackRock 572 1,961

iShares Euro Corporate Bond UCITS ETF IEAC BlackRock 409 1,815

iShares $ High Yield Corporate Bond UCITS ETF IHYU BlackRock 148 1,802

iShares J.P. Morgan $ Emerging Markets Bond UCITS ETF IEMB BlackRock 129 337

iShares $ TIPS UCITS ETF IDTP BlackRock 111 613

iShares $ Corporate Bond UCITS ETF LQDE BlackRock 108 1,710

iShares Euro Corporate Bond 1-5yr UCITS ETF IE15 BlackRock 104 850

iShares Euro Inflation Linked Government Bond UCITS ETF IBCI BlackRock 91 529

iShares CHF Corporate Bond (CH) CHCORP BlackRock 88 692

iShares J. P. Morgan $ EM Bond EUR Hedged UCITS ETF EMBE BlackRock 82 305

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


YTD Flows

iShares Core U.S. Aggregate Bond ETF AGG BlackRock 2,460 6,912

iShares U.S. Preferred Stock ETF PFF BlackRock 533 2,886

Vanguard Total Bond Market ETF BND Vanguard 438 1,553

iShares J.P. Morgan USD Emerging Markets Bond ETF EMB BlackRock 367 535

Vanguard Intermediate-Term Corporate Bond Index Fund VCIT Vanguard 296 1,720

iShares iBoxx $ High Yield Corporate Bond ETF HYG BlackRock 238 2,030

Vanguard Short-Term Corporate Bond Index Fund VCSH Vanguard 198 1,873

SPDR DoubleLine Total Return ETF TOTL State Street 162 1,245

Vanguard Intermediate-Term Bond ETF BIV Vanguard 159 2,725

PowerShares Emerging Markets Sovereign Debt Portfolio PCY PowerShares

135 393



December 2015 22

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


YTD Flows

db x-trackers II EONIA UCITS ETF 1C DBXT Deutsche Bank

(215) 198

LYXOR UCITS ETF EURO CASH CSH Société Générale

(123) (246)

iShares UK Gilts UCITS ETF IGLT BlackRock (116) 478

iShares eb.rexx Government Germany 1.5-2.5yr UCITS ETF (DE) EXHB BlackRock (113) (82)

iShares Emerging Markets Local Government Bond UCITS ETF IEML BlackRock (102) 320

ComStage Commerzbank FED Funds Effective Rate Index TR UCITS ETF C101 ComStage (97) 26

PIMCO Euro Short Maturity Source UCITS ETF PJS1 Source (93) 1,251

iShares $ Treasury Bond 1-3yr UCITS ETF IDBT BlackRock (93) (807)

db x-trackers II MTS Ex-Bank of Italy Aggregate UCITS ETF XITA Deutsche Bank

(87) (60)

db x-trackers II IBOXX Sovereigns Eurozone Yield + 1-3 ETF UCITS ETF XYP1 Deutsche Bank

(83) 492

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


YTD Flows

iShares 1-3 Year Treasury Bond ETF SHY BlackRock (1,491) 3,259

iShares 7-10 Year Treasury Bond ETF IEF BlackRock (858) 1,323

SPDR Barclays High Yield Bond ETF JNK State Street (779) 2,122

SPDR Barclays 1-3 Month T-Bill ETF BIL State Street (567) 864

PowerShares Senior Loan Portfolio ETF BKLN PowerShares

(497) (1,140)

iShares 20+ Year Treasury Bond ETF TLT BlackRock (431) (5)

iShares iBoxx $ Investment Grade Corporate Bond ETF LQD BlackRock (345) 5,727

iShares 3-7 Year Treasury Bond ETF IEI BlackRock (345) 1,244

iShares Short Treasury Bond ETF SHV BlackRock (342) 33

iShares Intermediate Government/Credit Bond ETF GVI BlackRock (159) 351



December 2015

23

For further information, please visit www.markit.com

Neil Mehta

VP

Fixed Income Analyst

Tel: +44 20 726 02298

Email: [email protected]

http://www.markit.com/

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