Bond Indices
Bond Indices | Global
05 September 2014
Global high grade profiles
curve rally delivers impressive return
 Global
After slowing and pausing over the prior two months the high grade Global Large
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Nicholas Godec
+1 646 556 2879
Research Analyst
MLPF&S
[email protected]
Cap Index posted a truly impressive 1.27% total return in August. The yield curve
rally was sizable and global in nature, with 9 of 10 currency segments in the
sovereign sector posting at least a 1% total return. (p 2)
Research Analyst
MLPF&S
[email protected]
Government index yield hovers just above all-time low
Access to BofA Merrill Lynch Bond Indices
The Global Government Index yield ended August at 1.17%, a 9% drop MOM. That
level is just 3bp above the all-time low of 1.14%, which was hit a little over a year
ago. (pp 2, 4, 10)
Top-quartile return for Global Government Index
The 1.37% total return of the Global Government Index is a top-quartile return for
the Global Government Index looks like over the last 25 years. And since yields
have been trending lower over that entire time frame what is particularly impressive
about August’s return is that that top-quartile return comes at a time when the yield
of the index is roughly half that of the average over the last 25 years. (p 10)
Credit basically tracked governments...and that’s not bad
What August was not was a credit rally. The excess return of the Global Large Cap
Non-Sovereign Index (-0.00%) reveals that credit basically tracked their
benchmarks this past month. But that was no small thing considering the sizable
curve rally. Sector level results were basically split between those with a small
positive excess return and those with a small negative one. (p 2)
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Preston Peacock
After 7 months, corporate downgrades back on top
After a six-month period in which the total face amount of Corporate upgrades
matched or was greater than that of downgrades, August broke the streak. The sixmonth run was impressive and was the longest-running uninterrupted streak for
upgrades since the first half of 2007. (p 2)
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Table of Contents
Global bond markets at a glance
Global Gov ernment Bond Index
Country weights & durations
Other high grade sov ereign indices
Inflation-linked indices
Currency & money market indices
Yield curv e spreads
2
10
14
16
20
21
23
Russia the largest of few sovereign losses in August
All the month’s losses are in the EMEA region, but Russia (-0.95%) is – without
surprise – in a class of its own. Russia’s debt fell sharply in the last few days of
August, as it became clear that the Ukraine conflict was far from over. The 1%
setback adds to prior losses, now totaling 4% YTD. Currency erosion about
quadruples those losses for USD based investors (-4.70% Aug; -14.96% YTD).
Inflation-linked sovereigns do well, EM does best
Inflation-linked sovereigns posted strong gains practically across the board in
August, and only two markets fell into the red: Japan and Korea. The emerging
markets segment not only did better than its developed counterpart in total return,
but also relative to nominals. Much of that is due to Brazil (4.68%, +1.85% excess)
– by far the sector’s largest constituent. (p 20)
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investment decision.
Refer to important disclosures on page 26 to 27. Link to Definitions on page 25.
11427194
Bond Indic es
05 Septem ber 2014
Global bond markets at a glance
After slowing and pausing over the prior two months the high grade Global Large
Cap Index posted a truly impressive 1.27% total return in August. The yield curve
rally was sizable and global in nature, with 9 of 10 currency segments in the
sovereign sector posting at least a 1% total return. Japan (0.36%) was the lone
hold-out, but still managed to post its fifth consecutive positive result. The Global
Government Index yield ended August at 1.17%, a 9% drop MOM. That level is
just 3bp above the all-time low of 1.14% which was hit a little over a year ago.
Global curve rally drove an impressive
return for the high grade index in August.
The Global Government Index yield is
back to within 3bp of the all-time low.
What August was not was a credit rally. The excess return of the Global Large
Cap Non-Sovereign Index (-0.00%) reveals that credit basically tracked their
benchmarks this past month. But that was no small thing considering the sizable
curve rally. Sector level results were basically split between those with a small
positive excess return and those with a small negative one. And that was true of
Quasi-Governments and Collateralized segments (+0.04% and -0.07%,
respectively) as well as Corporates (+0.03%). There was a slightly larger range
of excess returns across the corporate sectors, but not much, and the “winners”
and “losers” were basically matched (Table 1).
Credit tracked its benchmark debt, which
was impressive in its own right.
Excess returns were slightly positive or
negative across all segments and sectors.
After a six-month period in which the total face amount of Corporate upgrades
matched or was greater than that of downgrades, August broke the streak. Of a
total of $60bn in rating transitions this past month just $18bn was from upgrades.
The six-month run was impressive and was the longest-running uninterrupted
streak for upgrades since the first half of 2007. All impressive runs must come to
an end at some point, and this one certainly does not indicate we are on the brink
of a 2008 event.
Downgrades predominated in August
after a 6-month run of more upgrades.
This was the longest streak for upgrades
in 7 years.
Chart 1: Global Large Cap Index MTD return attribution
1.40%
Table 1: Global Large Cap Corporate Index excess return by sector
1.27%
1.24%
1.20%
1.00%
0.80%
0.60%
0.40%
0.24%
0.20%
0.00%
0.01%
0.00%
-0.40%
-0.14%
Coupon
Amort./Roll Curve Shift
Source: BofA Merrill Lynch Bond Indices
2
-0.02%
-0.03%
-0.20%
Curve
Reshape
Spread Vol. ChangeTotal Return
Change
Excess
Return
Automotiv e
Banking
Basic Industry
Capital Goods
Consumer Cyclical
Consumer Non-Cyclical
Energy
Financial Services
Healthcare
Insurance
Media
Real Estate
Serv ices
Technology & Electronics
Telecommunications
Utility
Grand Total
Source: BofA Merrill Lynch Bond Indices
0.08
0.11
0.20
-0.09
-0.11
0.01
0.00
0.00
-0.14
-0.16
0.12
0.04
-0.07
0.04
0.03
-0.03
0.03
Bond Indic es
05 Septem ber 2014
Total Return
1.42
1.38
1.04
1.08
BBB Corp
AAA Corp
AA Corp
A Corp
1.30
1.03
1.85
1.58
1.39
1.06
Corporates
0.90
0.67
Collat eralized
1.16
0.91
Quasi-Govt
1.37
1.17
Sovereign
Global Large Cap
2
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
1.27
1.04
Chart 2: Global Large Cap Index returns by asset class
Price Return
Source: BofA Merrill Lynch Bond Indices
Table 2: Global Fixed Income Market Returns (Local Currency Terms)
Total Rate of Return
Issues % Wgt 1-mo 3-mo 12-mo
Global Fixed Income Markets
Global Large Cap
US dollar
Euro
Sterling
Yen
Canadian dollar
Australian dollar
Other1
Non-Sov ereign
Quasi-Gov ernment
Collateralized
Corporate
17,741
13,952
8,444
3,222
895
609
516
227
39
12,996
2,459
3,738
6,799
100.0
100.0
46.4
26.8
6.3
15.8
2.6
1.4
0.7
43.4
11.0
16.0
16.4
1.25
1.27
1.11
1.63
3.32
0.35
1.12
1.11
1.84
1.15
1.16
0.89
1.39
1.75
1.79
0.90
3.32
3.77
0.79
1.99
2.28
3.17
1.46
1.87
0.87
1.76
6.93
6.72
5.65
10.43
8.01
2.75
7.40
7.35
8.89
7.18
7.06
5.69
8.76
Global Broad Market
US dollar
Euro
Sterling
Yen
Canadian dollar
Australian dollar
Other1
Non-Sov ereign
Quasi-Gov ernment
Collateralized
Corporate
21,952
12,771
3,634
1,136
2,394
1,367
611
39
20,996
4,833
4,941
11,222
100.0
46.7
25.9
6.1
16.1
3.0
1.5
0.7
46.2
12.0
15.4
18.8
1.27
1.13
1.62
3.30
0.34
1.12
1.09
1.84
1.15
1.13
0.89
1.37
1.78
0.94
3.31
3.76
0.79
2.05
2.27
3.17
1.48
1.83
0.87
1.75
6.75
5.83
10.41
8.05
2.74
7.75
7.42
8.89
7.22
6.92
5.69
8.70
EffDur Spread
6.32
6.44
5.56
6.15
9.41
8.19
7.51
4.85
8.19
5.35
5.67
4.33
6.14
57
37
40
55
33
0
50
23
0
68
46
42
109
6.46
5.64
6.13
9.36
8.10
7.62
4.75
8.19
5.51
5.90
4.32
6.24
40
44
56
36
1
62
32
0
71
46
43
110
Broad Market Plus
22,609
100.0
1.24
1.78
6.77
6.42
38
Global High Yield & EmgMkt Plus
4,884
100.0
1.08
1.37
11.66
4.78
334
1 Includes: Danish krone, Israel Shekel, Mexican Peso, Polish zloty, South Korean won, Swedish krona and
Sw iss franc.
Source: BofA Merrill Lynch Bond Indices
3
Bond Indic es
05 Septem ber 2014
The Global Government Index yield
dropped 12bp M OM, and is now just 3bp
over the 1.14% all-time low from M ay-13.
Chart 3: Global Government Index Weighted Average Yield
1.65
1.60
Weighted Av erage Yield to Worst (s.a.)
1.55
1.50
1.45
1.40
1.35
1.30
1.25
1.20
1.15
Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14
Source: BofA Merrill Lynch Bond Indices
Chart 4: Global Large Cap Non-Sovereign Index spread by sector
160
140
Option-Adjusted Spread
The Non-Sovereign spread rose a modest
1bp during August as credit overall, and
each asset classed more or less kept pace
with the sizable yield curve rally.
120
100
80
60
40
Large Cap Quasi-Government
Large Cap Collateralized
Large Cap Corporat e
Aug-14
Jul-14
Jun-14
May-14
Apr-14
Mar-14
Feb-14
Jan-14
Dec-13
Large Cap Non-S overeign
Source: BofA Merrill Lynch Bond Indices
4
Nov-13
Sep-13
Aug-13
0
Oct-13
20
Bond Indic es
05 Septem ber 2014
Chart 5: Global Large Cap Corporate Spreads by Rating
250
Option Adjusted Spr ead (bps)
200
150
100
Jul-14
Aug-14
BBB
Jun-14
May-14
A
Apr-14
Mar-14
AA
Feb-14
AAA
Jan-14
Dec-13
Nov-13
Sep-13
0
Oct-13
50
Aug-13
The spread of the tiny AAA segment
widened the most in August (+3bp)
Source: BofA Merrill Lynch Bond Indices
5
Bond Indic es
05 Septem ber 2014
Table 3: Global High Grade Index Return Attribution By Sector - Month
Amort./
Curve
Index Ticker
Coupon
Roll
Shift
Curve
Reshape
Spread
Change
Change in
Imp Vol
Total
Return
Excess
Return
Lar ge Cap Ser ies
Global Large Cap
GLCI
0.24%
-0.03%
1.24%
-0.14%
-0.02%
0.00%
1.27%
0.01%
Sovereign
Non-Sovereign
Quasi-Government
W0G1
G0LN
G0LQ
0.20%
0.30%
0.25%
-0.03%
-0.03%
-0.05%
1.29%
1.18%
1.18%
-0.10%
-0.20%
-0.21%
0.01%
-0.06%
-0.01%
0.00%
-0.01%
0.00%
1.37%
1.15%
1.16%
0.03%
-0.01%
0.04%
Collateralized
Corporate
Financial
G0LL
G0LC
G0LB
0.30%
0.33%
0.32%
0.03%
-0.09%
-0.15%
1.00%
1.37%
1.09%
-0.20%
-0.18%
-0.27%
-0.12%
-0.04%
0.05%
-0.03%
0.00%
0.00%
0.90%
1.39%
1.05%
-0.07%
0.03%
0.07%
Industrial
Utility
AAA Corporate
G0LD
G0LE
GLC1
0.33%
0.36%
0.27%
-0.03%
-0.16%
0.00%
1.50%
1.88%
1.84%
-0.13%
-0.14%
0.01%
-0.10%
-0.04%
-0.26%
0.00%
0.00%
-0.01%
1.57%
1.88%
1.85%
0.01%
-0.03%
-0.20%
AA Corporate
A Corporate
BBB Corporate
GLC2
GLC3
GLC4
0.27%
0.31%
0.37%
-0.04%
-0.12%
-0.07%
1.29%
1.37%
1.39%
-0.19%
-0.19%
-0.18%
-0.03%
0.02%
-0.10%
0.00%
0.00%
0.00%
1.30%
1.38%
1.42%
0.04%
0.03%
0.03%
By Mar ket
US Large Cap
Euro-US Dollar Ex -Global Large
USL0
0.26%
0.02%
1.12%
-0.15%
-0.11%
-0.01%
1.12%
-0.06%
Cap
EMU Large Cap
Sterling Large Cap
E0AL
EMUL
UKL0
0.30%
0.26%
0.32%
0.01%
-0.10%
-0.09%
0.77%
1.66%
2.99%
-0.29%
-0.27%
0.10%
-0.06%
0.09%
0.00%
0.00%
0.00%
0.00%
0.73%
1.63%
3.32%
0.06%
0.16%
-0.04%
Denmark Government
Sweden Government
Swiss Government
G0M0
G0W0
G0S0
0.25%
0.26%
0.19%
-0.11%
-0.12%
-0.11%
2.26%
1.46%
1.21%
-0.05%
0.17%
0.00%
-0.01%
0.02%
-0.09%
0.00%
0.00%
0.00%
2.35%
1.79%
1.21%
0.00%
0.02%
-0.07%
Japan Large Cap
Canada Large Cap
Euro-C$ Ex -Global Large Cap
JPL0
CAL0
E0KL
0.10%
0.28%
0.27%
-0.02%
-0.17%
-0.07%
0.30%
1.00%
0.50%
-0.03%
-0.07%
-0.25%
-0.01%
0.08%
-0.04%
0.00%
0.00%
0.00%
0.35%
1.12%
0.40%
-0.02%
0.01%
0.01%
Australia Large Cap
Euro-A$ Ex -Global Large Cap
Br oad Mar ket Ser ies
AUL0
E0TL
0.40%
0.37%
-0.08%
0.01%
0.76%
0.73%
0.00%
-0.02%
0.04%
-0.19%
0.00%
0.00%
1.12%
0.90%
0.08%
-0.08%
Global Broad Market
Sovereign
Non-Sovereign
GBMI
W0G1
G0BN
0.24%
0.20%
0.30%
-0.03%
-0.03%
-0.04%
1.24%
1.29%
1.17%
-0.14%
-0.10%
-0.18%
-0.03%
0.01%
-0.07%
0.00%
0.00%
-0.01%
1.27%
1.37%
1.15%
0.01%
0.03%
-0.01%
Quasi-Government
Collateralized
Corporate
G0BQ
G0BL
G0BC
0.24%
0.30%
0.33%
-0.04%
0.03%
-0.08%
1.13%
1.00%
1.35%
-0.19%
-0.20%
-0.17%
-0.01%
-0.13%
-0.07%
0.00%
-0.03%
0.00%
1.13%
0.90%
1.36%
0.04%
-0.07%
0.01%
G0BF
G0BI
G0BU
0.32%
0.33%
0.35%
-0.14%
-0.03%
-0.13%
1.08%
1.46%
1.75%
-0.25%
-0.12%
-0.09%
0.02%
-0.11%
-0.13%
0.00%
0.00%
0.00%
1.03%
1.52%
1.76%
0.05%
-0.01%
-0.09%
AAA Corporate
AA Corporate
A Corporate
GBC1
GBC2
GBC3
0.28%
0.27%
0.31%
-0.02%
-0.04%
-0.11%
1.72%
1.27%
1.35%
-0.02%
-0.17%
-0.17%
-0.24%
-0.03%
-0.01%
-0.01%
0.00%
0.00%
1.72%
1.30%
1.37%
-0.18%
0.03%
0.01%
BBB Corporate
By Mar ket
US Broad Market
GBC4
0.38%
-0.07%
1.36%
-0.17%
-0.13%
0.00%
1.37%
-0.01%
US00
0.27%
0.02%
1.13%
-0.14%
-0.11%
-0.01%
1.13%
-0.07%
Euro-US Dollar Ex -Globals
EMU Broad Market
Sterling Broad Market
E0AX
EMU0
UK00
0.31%
0.26%
0.33%
0.01%
-0.10%
-0.09%
0.76%
1.65%
2.97%
-0.29%
-0.27%
0.10%
-0.04%
0.09%
0.00%
0.00%
0.00%
0.00%
0.74%
1.62%
3.30%
0.08%
0.16%
-0.04%
Denmark Government
Sweden Government
Swiss Government
G0M0
G0W0
G0S0
0.25%
0.26%
0.19%
-0.11%
-0.12%
-0.11%
2.26%
1.46%
1.21%
-0.05%
0.17%
0.00%
-0.01%
0.02%
-0.09%
0.00%
0.00%
0.00%
2.35%
1.79%
1.21%
0.00%
0.02%
-0.07%
Japan Broad Market
JP00
Canada Broad Market
CAN0
Euro-Canadian Dollar Ex -Globals E0KX
0.10%
0.29%
0.33%
-0.02%
-0.15%
-0.07%
0.29%
1.02%
0.61%
-0.03%
-0.06%
-0.17%
-0.01%
0.03%
-0.07%
0.00%
0.00%
0.00%
0.34%
1.13%
0.63%
-0.01%
-0.01%
0.04%
Australia Broad Market
AUD0
Euro-Australian Dollar Ex -Globals E0TX
New Zealand Government
G0Z0
0.40%
0.37%
0.42%
-0.08%
-0.01%
-0.04%
0.75%
0.61%
0.61%
-0.01%
-0.10%
0.05%
0.04%
0.00%
0.01%
0.00%
0.00%
0.00%
1.10%
0.87%
1.04%
0.08%
0.09%
0.04%
Br oad Mar ket Plus Ser ies
Global Broad Market Plus
0.25%
-0.03%
1.20%
-0.14%
-0.03%
0.00%
1.24%
0.01%
Financial
Industrial
Utility
GBMP
See “ Bond Index Rules & Definitions” for a description of the return attribution methodology.
Source: BofA Merrill Lynch Bond Indices
6
Bond Indic es
05 Septem ber 2014
Table 4: Global High Grade Index Return Attribution By Sector - Year-to-Date
Index
Lar ge Cap Ser ies
Global Large Cap
Sovereign
Non-Sovereign
Quasi-Government
Collateralized
Corporate
Financial
Industrial
Utility
AAA Corporate
AA Corporate
A Corporate
BBB Corporate
By Mar ket
US Large Cap
Euro-US Dollar Ex -Global Large Cap
EMU Large Cap
Sterling Large Cap
Denmark Government
Sweden Government
Swiss Government
Japan Large Cap
Canada Large Cap
Euro-C$ Ex -Global Large Cap
Australia Large Cap
Euro-A$ Ex -Global Large Cap
Br oad Mar ket Ser ies
Global Broad Market
Sovereign
Non-Sovereign
Quasi-Government
Collateralized
Corporate
Financial
Industrial
Utility
AAA Corporate
AA Corporate
A Corporate
BBB Corporate
By Mar ket
US Broad Market
Euro-US Dollar Ex -Globals
EMU Broad Market
Sterling Broad Market
Denmark Government
Sweden Government
Swiss Government
Japan Broad Market
Canada Broad Market
Euro-Canadian Dollar Ex -Globals
Australia Broad Market
Euro-Australian Dollar Ex -Globals
New Zealand Government
Br oad Mar ket Plus Ser ies
Global Broad Market Plus
Coupon
Amort./
Roll
Curve
Shift
Curve
Reshape
Spread
Change
MBS
Principal
Paydown
Change in
Imp Vol
Total
Return
Excess
Return
GLCI
W0G1
G0LN
G0LQ
G0LL
G0LC
G0LB
G0LD
G0LE
GLC1
GLC2
GLC3
GLC4
2.02%
1.66%
2.50%
2.11%
2.48%
2.79%
2.70%
2.81%
3.05%
2.33%
2.27%
2.57%
3.21%
-0.22%
-0.19%
-0.25%
-0.31%
-0.06%
-0.39%
-0.58%
-0.21%
-0.61%
-0.01%
-0.29%
-0.42%
-0.39%
3.96%
4.05%
3.84%
4.02%
3.36%
4.19%
3.37%
4.63%
5.37%
5.60%
3.93%
4.16%
4.28%
-0.56%
-0.39%
-0.78%
-0.71%
-0.91%
-0.71%
-1.06%
-0.52%
-0.14%
0.11%
-0.72%
-0.74%
-0.69%
0.59%
0.57%
0.62%
0.78%
0.18%
0.95%
0.94%
0.94%
1.07%
-0.21%
0.40%
0.63%
1.51%
-0.08%
0.00%
-0.18%
0.00%
-0.49%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
-0.01%
0.00%
-0.01%
0.00%
-0.03%
0.00%
0.00%
0.00%
0.00%
-0.01%
0.00%
0.00%
-0.01%
5.71%
5.70%
5.73%
5.89%
4.52%
6.83%
5.37%
7.63%
8.75%
7.82%
5.59%
6.19%
7.93%
0.96%
0.76%
1.23%
1.26%
0.60%
1.83%
1.77%
1.86%
1.99%
0.23%
0.94%
1.28%
2.79%
USL0
E0AL
EMUL
UKL0
G0M0
G0W0
G0S0
JPL0
CAL0
E0KL
AUL0
E0TL
2.17%
2.48%
2.23%
2.73%
2.17%
2.27%
1.69%
0.82%
2.33%
2.29%
3.38%
3.15%
0.06%
0.02%
-0.66%
-0.34%
-0.80%
-0.77%
-0.91%
-0.12%
-0.45%
-0.49%
-0.53%
0.31%
3.56%
2.42%
5.74%
5.55%
6.89%
6.85%
5.42%
1.32%
4.67%
2.46%
3.21%
3.23%
-0.97%
-1.86%
-0.46%
0.19%
0.02%
0.32%
0.03%
0.04%
-0.22%
-1.16%
-0.03%
-0.05%
0.24%
1.35%
1.70%
0.11%
-0.02%
-0.08%
0.06%
-0.01%
0.27%
0.61%
0.42%
0.23%
-0.17%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
-0.01%
-0.01%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
4.87%
4.40%
8.56%
8.23%
8.24%
8.58%
6.28%
2.04%
6.60%
3.72%
6.46%
6.88%
0.58%
2.33%
2.40%
0.36%
0.03%
-0.13%
0.20%
-0.04%
0.56%
1.20%
0.68%
1.11%
GBMI
W0G1
G0BN
G0BQ
G0BL
G0BC
G0BF
G0BI
G0BU
GBC1
GBC2
GBC3
GBC4
2.05%
1.66%
2.50%
2.06%
2.48%
2.81%
2.71%
2.84%
2.98%
2.42%
2.26%
2.58%
3.23%
-0.22%
-0.19%
-0.25%
-0.29%
-0.07%
-0.39%
-0.58%
-0.23%
-0.53%
-0.14%
-0.29%
-0.43%
-0.39%
3.94%
4.05%
3.81%
3.87%
3.35%
4.16%
3.33%
4.55%
5.19%
5.23%
3.88%
4.15%
4.24%
-0.55%
-0.39%
-0.73%
-0.61%
-0.91%
-0.65%
-1.02%
-0.51%
-0.04%
-0.04%
-0.64%
-0.64%
-0.68%
0.61%
0.57%
0.65%
0.77%
0.19%
0.97%
0.96%
0.97%
0.95%
-0.11%
0.41%
0.62%
1.53%
-0.08%
0.00%
-0.17%
0.00%
-0.48%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
-0.01%
0.00%
-0.01%
0.00%
-0.03%
0.00%
0.00%
-0.01%
-0.01%
-0.01%
0.00%
0.00%
-0.01%
5.75%
5.70%
5.80%
5.79%
4.52%
6.89%
5.41%
7.63%
8.54%
7.35%
5.61%
6.28%
7.92%
1.00%
0.76%
1.27%
1.24%
0.62%
1.86%
1.81%
1.91%
1.82%
0.35%
0.94%
1.27%
2.80%
US00
E0AX
EMU0
UK00
G0M0
G0W0
G0S0
JP00
CAN0
E0KX
AUD0
E0TX
G0Z0
2.22%
2.51%
2.24%
2.75%
2.17%
2.27%
1.69%
0.82%
2.46%
2.71%
3.41%
3.09%
3.48%
0.04%
0.00%
-0.66%
-0.35%
-0.80%
-0.77%
-0.91%
-0.13%
-0.46%
-0.44%
-0.51%
0.03%
-0.36%
3.60%
2.40%
5.72%
5.52%
6.89%
6.85%
5.42%
1.31%
4.77%
2.88%
3.17%
2.53%
1.51%
-0.93%
-1.85%
-0.46%
0.19%
0.02%
0.32%
0.03%
0.03%
-0.19%
-0.69%
-0.06%
-0.47%
0.13%
0.29%
1.39%
1.69%
0.12%
-0.02%
-0.08%
0.06%
0.00%
0.33%
0.73%
0.49%
0.39%
0.00%
-0.17%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
-0.01%
-0.01%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
5.04%
4.45%
8.53%
8.24%
8.24%
8.58%
6.28%
2.03%
6.90%
5.19%
6.50%
5.57%
4.77%
0.67%
2.41%
2.40%
0.40%
0.03%
-0.13%
0.20%
-0.01%
0.72%
1.69%
0.80%
1.09%
0.18%
GBMP
2.11%
-0.20%
3.85%
-0.52%
0.59%
-0.07%
-0.01%
5.74%
0.96%
Ticker
See “ Bond Index Rules & Definitions” for a description of the return attribution methodology.
Source: BofA Merrill Lynch Bond Indices
7
Bond Indic es
05 Septem ber 2014
Table 5: Global Large Cap Index Characteristics
Index
Ticker
Global Large Cap
GLCI
By Sector:
Sov ereign
Quasi-Gov ernment
Collateralized
Corporate
Financial
Industrial
Utility
W0G1
G0LQ
G0LL
G0LC
G0LB
G0LD
G0LE
By Currency:
Australian Dollar
Canadian Dollar
Danish Krone
Euro
Japanese Yen
Sterling
Sw edish Krona
Sw iss Franc
U.S. Dollar
By Maturity :
1-3 Year
3-5 Year
5-7 Year
7-10 Year
10+ Year
G1CI
G2CI
G3CI
G4CI
G9CI
Source: BofA Merrill Lynch Bond Indices
8
%Weight
EffDur
31-Aug-14
DurCont
56.6
11.0
16.0
16.4
6.4
8.7
1.3
7.27
5.68
4.34
6.13
4.82
6.90
7.45
1.4
2.6
0.3
26.8
15.8
6.3
0.2
0.2
46.4
23.6
21.4
16.7
17.4
20.8
100.0
6.44
6.44
EffConvx EffYld OAS
0.56
1.60
37
4.11
0.62
0.69
1.00
0.31
0.60
0.10
1.06
0.62
-1.44
0.73
0.44
0.90
1.02
1.17
1.59
2.27
2.45
2.20
2.63
2.52
13
46
42
109
109
108
114
4.85
7.50
8.18
6.15
8.19
9.41
6.93
9.25
5.56
0.07
0.20
0.02
1.65
1.29
0.59
0.01
0.02
2.58
0.37
1.17
1.28
0.70
1.23
1.73
0.82
1.55
0.04
3.16
2.23
0.76
1.01
0.49
2.44
0.94
0.43
2.14
1.88
3.67
5.17
7.20
14.83
0.45
0.78
0.86
1.25
3.09
0.04
-0.13
-0.42
0.09
3.02
0.59
1.26
1.81
2.05
2.56
%Weight
0.0
Change vs Prior Month
EffDur DurCont EffConvx EffYld OAS
0.02
0.02
-0.04
-0.13
0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.10
0.02
-0.27
0.05
0.01
0.06
0.07
0.05
0.00
-0.04
0.01
0.00
0.01
0.00
0.03
0.01
-0.37
0.02
0.01
0.03
0.03
-0.12
-0.12
-0.15
-0.14
-0.12
-0.15
-0.19
-1
0
2
1
0
1
1
23
50
2
55
0
33
-2
0
40
0.0
0.0
0.0
-0.2
0.0
0.1
0.0
0.0
0.1
0.01
0.08
0.11
0.03
-0.02
0.26
0.77
0.02
-0.01
0.00
0.00
0.00
0.00
-0.01
0.02
0.00
0.00
0.00
0.00
0.02
0.03
0.02
0.00
0.09
0.11
0.01
-0.11
-0.14
-0.08
-0.21
-0.19
-0.02
-0.29
-0.11
-0.08
-0.11
-1
0
-1
-3
0
0
0
0
2
20
31
40
47
52
-0.2
-0.1
0.6
-0.7
0.4
-0.03
-0.05
-0.11
-0.06
0.14
-0.01
-0.02
0.01
-0.06
0.09
0.00
-0.06
-0.20
-0.07
0.05
-0.04
-0.10
-0.11
-0.22
-0.21
-1
-1
1
1
1
Bond Indic es
05 Septem ber 2014
Table 6: Global Broad Market Index Characteristics
Index
Ticker
By Sector:
Sov ereign
Quasi-Gov ernment
Collateralized
Corporate
Financial
Industrial
Utility
W0G1
G0BQ
G0BL
G0BC
G0BF
G0BI
G0BU
Global Broad Market
GBMI
By Currency:
Australian Dollar
Canadian Dollar
Danish Krone
Euro
Japanese Yen
Sterling
Sw edish Krona
Sw iss Franc
U.S. Dollar
By Maturity
1-3 Year
3-5 Year
5-7 Year
7-10 Year
10+ Year
G1MI
G2MI
G3MI
G4MI
G9MI
%Weight EffDur
100.0
6.46
53.8
12.0
15.5
18.7
6.8
10.0
1.9
7.27
5.91
4.34
6.23
4.84
6.91
7.69
1.5
3.0
0.3
25.9
16.1
6.1
0.2
0.2
46.7
23.6
21.3
16.5
17.3
21.3
31-Aug-14
DurCont
6.46
EffConvx EffYld OAS
0.57
1.64
40
3.91
0.71
0.67
1.17
0.33
0.69
0.15
1.06
0.64
-1.41
0.76
0.45
0.90
1.11
1.17
1.58
2.27
2.50
2.22
2.67
2.57
4.75
7.62
8.18
6.13
8.10
9.36
6.93
9.25
5.64
0.07
0.23
0.02
1.59
1.30
0.58
0.01
0.02
2.64
0.35
1.20
1.28
0.70
1.20
1.71
0.82
1.55
0.09
1.88
3.66
5.17
7.20
14.72
0.44
0.78
0.85
1.25
3.13
0.03
-0.12
-0.39
0.11
2.98
Change vs Prior Month
%Weight EffDur DurCont EffConvx EffYld OAS
0.0
0.02
0.02
-0.04
-0.13
1
13
46
43
109
110
109
107
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.10
0.02
-0.27
0.05
0.01
0.06
0.07
0.05
0.00
-0.04
0.01
0.00
0.01
0.00
0.03
0.00
-0.36
0.02
0.01
0.02
0.03
-0.12
-0.12
-0.15
-0.13
-0.11
-0.14
-0.16
-1
1
2
1
0
1
1
3.25
2.37
0.76
1.02
0.49
2.47
0.94
0.43
2.19
32
62
2
56
1
36
-2
0
44
0.0
0.0
0.0
-0.2
0.0
0.1
0.0
0.0
0.1
0.01
0.07
0.11
0.03
-0.02
0.26
0.77
0.02
-0.01
0.00
0.00
0.00
0.00
-0.01
0.02
0.00
0.00
0.00
0.00
0.02
0.03
0.02
0.00
0.09
0.11
0.01
-0.10
-0.14
-0.08
-0.21
-0.19
-0.02
-0.29
-0.11
-0.08
-0.11
-2
1
-1
-2
0
1
0
0
2
0.61
1.28
1.83
2.07
2.64
22
33
42
49
57
-0.2
-0.1
0.5
-0.7
0.4
-0.03
-0.05
-0.11
-0.06
0.14
-0.01
-0.02
0.01
-0.06
0.09
-0.01
-0.06
-0.20
-0.07
0.05
-0.04
-0.10
-0.11
-0.22
-0.21
-1
0
1
1
1
Source: BofA Merrill Lynch Bond Indices
9
Bond Indic es
05 Septem ber 2014
Global Government Bond Index
August's return is not just the 2nd best in
the last 2 years...
A 1+% return for a high grade index will just about always be considered a good
month, but when we are talking about a developed markets sovereign index and
the starting yield is 1.29% then that kind of return is particularly impressive. The
1.37% total return of the Global Government Index comes from a 13bp decline in
the yield of the index – a nearly 10% drop. That return is also the second-best
monthly result in 2014 (after January’s 1.62%) and is also the second-best over
the last two years. The return is also quite good even viewed against the longer
history of the index. In fact, this is what a top-quartile return for the Global
Government Index looks like over the last 25 years. And since yields have been
trending lower over that entire time frame, what is particularly impressive about
August’s return is that that top-quartile return comes at a time when the yield of
the index is roughly half that of the average over the last 25 years.
...and it’s a top-quartile result over the
last 25 years.
This is even more impressive since the
yield of the index is half its avg. over
that period.
August’s curve rally was widespread and while all constituents posted gains it
was the euro segment that did the best, by far, of the “big three” (USD, EUR,
JPY). This had nothing to with the spread compression from peripheral
constituents; the excess return of the index over equivalent German governments
was just +0.11%. Bunds rallied by 27bps on average after the German economy
contracted by 0.2% in Q2. Both the 10-year and the index average yield reached
historical lows in August, ending the month at 0.93% and 0.56%, respectively.
U.K. Gilts (3.52%) delivered the best return this past month, helped considerably
by the index’s roughly three year longer duration. The only index constituent to
record a return of less than 1% this past month was Japan (0.36%), which was a
considerable drag on performance as it comprises a quarter of the Global
Government Index.
All constituents rallied, but the Eurozone
made the biggest impact, with little help
from peripheral spread tightening.
Gilts came out on top thanks to their 10year duration.
Chart 6: Daily performance of major Global Government Index
Constituents
Chart 7: Global Government Index MTD & YTD return attribution
7.00%
6.00%
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%
-1.00%
103.3
102.8
102.3
101.8
101.3
100.8
Global Govt Index
UK
Source: BofA Merrill Lynch Bond Indices
10
USAxis Title
Canada
30-Aug
28-Aug
26-Aug
24-Aug
22-Aug
20-Aug
18-Aug
16-Aug
14-Aug
12-Aug
10-Aug
8-Aug
6-Aug
4-Aug
2-Aug
99.8
31-Jul
100.3
MTD
Euro
Japan
Source: BofA Merrill Lynch Bond Indices
YTD
Bond Indic es
05 Septem ber 2014
Table 7: Global Government Indices — Total Return, Hedged and Unhedged
31-Aug-14
Ticker
Local
USD
EUR
Total return - unhedged
GBP
JPY
Local
USD
YTD
EUR
GBP
JPY
Austria
Belgium
Finland
France
Germany
Ireland
Italy
Latv ia
Lux embourg
Netherlands
Slov akia
Slov enia
Spain
Sub-Total: EMU
Denmark
Sw eden
Sw itzerland
U.K.
Sub-Total: Non-EMU
PAN-EUROPE
Australia
Canada
U.S.
Japan
G0H0
G0G0
G0K0
G0F0
G0D0
G0R0
G0I0
G0LV
G0LU
G0N0
G0SL
G0SV
G0E0
EG00
G0M0
G0W0
G0S0
G0L0
W0GN
W0GE
G0T0
G0C0
G0Q0
G0Y0
2.12
2.19
1.69
1.90
1.91
1.79
1.62
1.97
1.88
2.10
1.66
2.53
2.31
1.92
2.35
1.79
1.21
3.52
3.28
2.25
1.21
1.03
1.22
0.36
0.54
0.61
0.11
0.32
0.32
0.21
0.04
0.39
0.29
0.51
0.08
0.94
0.72
0.33
0.83
0.83
0.48
1.83
1.67
0.66
1.82
1.40
1.22
-0.66
2.12
2.19
1.69
1.90
1.91
1.79
1.62
1.97
1.88
2.10
1.66
2.53
2.31
1.92
2.42
2.42
2.07
3.44
3.28
2.25
3.43
3.00
2.82
0.91
2.21
2.27
1.77
1.98
1.99
1.87
1.70
2.05
1.96
2.18
1.74
2.61
2.39
2.00
2.50
2.51
2.15
3.52
3.36
2.33
3.51
3.08
2.90
0.99
1.56
1.63
1.13
1.34
1.35
1.23
1.06
1.41
1.32
1.54
1.10
1.97
1.75
1.36
1.86
1.86
1.51
2.87
2.71
1.69
2.86
2.43
2.25
0.36
9.44
10.85
7.78
9.23
7.57
11.22
11.63
n.a.
9.17
8.62
8.15
14.63
13.21
10.05
8.24
8.58
6.29
8.24
8.18
9.63
6.56
5.52
4.32
2.09
4.61
5.96
3.03
4.42
2.83
6.32
6.71
n.a.
4.35
3.83
3.38
9.58
8.22
5.20
3.62
0.04
3.21
8.54
7.62
5.78
11.40
3.36
4.32
3.29
9.44
10.85
7.78
9.23
7.57
11.22
11.63
n.a.
9.17
8.62
8.15
14.63
13.21
10.05
8.40
4.65
7.97
13.54
12.59
10.66
16.54
8.13
9.13
8.05
4.33
5.68
2.75
4.14
2.55
6.03
6.42
n.a.
4.07
3.55
3.10
9.28
7.93
4.92
3.34
-0.23
2.93
8.24
7.33
5.50
11.10
3.08
4.03
3.01
3.40
4.73
1.83
3.21
1.64
5.08
5.47
n.a.
3.14
2.63
2.18
8.31
6.96
3.98
2.41
-1.12
2.01
7.28
6.37
4.56
10.11
2.16
3.11
2.09
Global Government Index
Global, ex base currency
W0G1
1.37
0.52
0.17
N0G1
2.11
2.19
N0Q1
2.19
2.08
N0L1
1.55
1.98
N0Y1
5.70
4.63
4.79
N0G1
9.46
9.22
N0Q1
4.35
4.04
N0L1
3.42
3.91
N0Y1
Total return - hedged
Austria
Belgium
Finland
France
Germany
Ireland
Italy
Latv ia
Lux embourg
Netherlands
Slov akia
Slov enia
Spain
Sub-Total: EMU
Denmark
Sw eden
Sw itzerland
U.K.
Sub-Total: Non-EMU
PAN-EUROPE
Australia
Canada
U.S.
Japan
Global Government Index
Global, ex base currency
Ticker
G0H0
G0G0
G0K0
G0F0
G0D0
G0R0
G0I0
G0LV
G0LU
G0N0
G0SL
G0SV
G0E0
EG00
G0M0
G0W0
G0S0
G0L0
W0GN
W0GE
G0T0
G0C0
G0Q0
G0Y0
W0G1
USD
2.10
2.17
1.67
1.88
1.89
1.77
1.60
1.95
1.86
2.07
1.64
2.50
2.28
1.90
2.33
1.76
1.22
3.44
3.21
2.22
1.01
0.96
1.22
0.37
1.36
1.43
N0G1
31-Aug-14
EUR
2.12
2.19
1.69
1.90
1.91
1.79
1.62
1.97
1.88
2.10
1.66
2.53
2.31
1.92
2.36
1.77
1.23
3.49
3.25
2.24
1.02
0.97
1.23
0.37
1.37
1.15
N0Q1
GBP
2.16
2.23
1.73
1.94
1.94
1.83
1.66
2.01
1.91
2.13
1.69
2.57
2.34
1.96
2.40
1.81
1.26
3.52
3.29
2.28
1.05
1.00
1.26
0.40
1.40
1.23
N0L1
JPY
2.11
2.17
1.67
1.88
1.89
1.77
1.60
1.96
1.86
2.08
1.64
2.51
2.29
1.90
2.34
1.76
1.21
3.46
3.22
2.22
1.00
0.95
1.21
0.36
1.35
1.71
N0Y1
USD
9.32
10.72
7.68
9.12
7.47
11.15
11.58
n.a.
9.06
8.51
8.14
14.66
13.11
9.96
8.31
8.06
6.40
7.95
7.92
9.50
4.79
4.80
4.32
2.26
5.67
6.37
N0G1
YTD
EUR
9.44
10.85
7.78
9.23
7.57
11.22
11.63
n.a.
9.17
8.62
8.15
14.63
13.21
10.05
8.43
8.17
6.50
8.09
8.06
9.60
4.85
4.89
4.37
2.28
5.74
4.07
N0Q1
GBP
9.56
10.96
7.91
9.36
7.71
11.34
11.76
n.a.
9.29
8.75
8.31
14.81
13.33
10.18
8.57
8.30
6.64
8.24
8.20
9.73
4.99
5.03
4.53
2.44
5.88
5.69
N0L1
JPY
9.13
10.52
7.49
8.93
7.28
10.94
11.38
n.a.
8.86
8.33
7.98
14.51
12.90
9.76
8.12
7.88
6.20
7.78
7.75
9.31
4.60
4.60
4.12
2.09
5.48
6.72
N0Y1
Source: BofA Merrill Lynch Bond Indices
11
Bond Indic es
05 Septem ber 2014
Table 8: Global Government Indices — Price Return, Hedged and Unhedged
31-Aug-14
Price Return - Unhedged
Austria
Belgium
Finland
France
Germany
Ireland
Italy
Latv ia
Lux embourg
Netherlands
Slov akia
Slov enia
Spain
Sub-Total: EMU
Denmark
Sw eden
Sw itzerland
U.K.
Sub-Total: Non-EMU
PAN-EUROPE
Australia
Canada
U.S.
Japan
GLOBAL GOVERNMENTS
Global, Ex Base Currency
Price Return - Hedged
Ticker
G0H0
G0G0
G0K0
G0F0
G0D0
G0R0
G0I0
G0LV
G0LU
G0N0
G0SL
G0SV
G0E0
EG00
G0M0
G0W0
G0S0
G0L0
W0GN
W0GE
G0T0
G0C0
G0Q0
G0Y0
W0G1
Local
1.87
1.93
1.48
1.66
1.71
1.46
1.31
1.75
1.68
1.88
1.38
2.22
1.99
1.66
2.10
1.52
1.01
3.23
3.00
1.98
0.84
0.81
1.02
0.26
1.17
N0G1
Ticker
USD
0.28
0.34
-0.09
0.08
0.13
-0.12
-0.27
0.17
0.10
0.30
-0.20
0.63
0.41
0.08
0.58
0.57
0.29
1.54
1.39
0.40
1.45
1.18
1.02
-0.76
0.33
-0.03
USD
N0Q1
EUR
1.87
1.93
1.48
1.66
1.71
1.46
1.31
1.75
1.68
1.88
1.38
2.22
1.99
1.66
2.17
2.16
1.87
3.15
2.99
1.98
3.05
2.77
2.62
0.81
1.91
2.01
31-Aug-14
EUR
YTD
N0L1
GBP
1.95
2.01
1.56
1.74
1.79
1.54
1.39
1.83
1.76
1.96
1.45
2.30
2.07
1.74
2.25
2.24
1.95
3.23
3.07
2.06
3.13
2.86
2.70
0.89
1.99
1.89
GBP
N0Y1
JPY
1.31
1.37
0.93
1.10
1.15
0.90
0.75
1.19
1.12
1.32
0.82
1.66
1.43
1.10
1.61
1.60
1.31
2.58
2.43
1.42
2.48
2.21
2.06
0.26
1.35
1.75
JPY
Local
7.19
8.47
5.98
7.14
5.89
8.27
8.85
0.00
7.44
6.77
5.74
11.73
10.37
7.76
6.08
6.32
4.59
5.75
5.75
7.31
3.38
3.68
2.74
1.27
4.04
N0G1
USD
2.46
3.69
1.31
2.41
1.22
3.50
4.05
0.00
2.70
2.07
1.08
6.80
5.51
3.01
1.54
-2.05
1.57
6.04
5.21
3.54
8.08
1.55
2.74
2.46
2.99
3.11
USD
N0Q1
EUR
7.19
8.47
5.98
7.14
5.89
8.28
8.85
0.00
7.44
6.77
5.74
11.73
10.37
7.76
6.22
2.47
6.25
10.93
10.06
8.32
13.06
6.23
7.48
7.18
7.74
7.73
YTD
EUR
N0L1
GBP
2.18
3.41
1.04
2.14
0.95
3.22
3.77
0.00
2.42
1.79
0.81
6.51
5.22
2.73
1.26
-2.31
1.29
5.75
4.92
3.26
7.79
1.27
2.47
2.18
2.71
2.47
GBP
N0Y1
JPY
1.27
2.49
0.13
1.23
0.05
2.30
2.85
0.00
1.51
0.88
-0.10
5.56
4.28
1.82
0.36
-3.19
0.39
4.81
3.99
2.34
6.82
0.37
1.55
1.27
1.80
2.00
JPY
Austria
Belgium
Finland
France
Germany
Ireland
Italy
Latv ia
Lux embourg
Netherlands
Slov akia
Slov enia
Spain
Sub-Total: EMU
Denmark
Sw eden
Sw itzerland
U.K.
Sub-Total: Non-EMU
PAN-EUROPE
Australia
Canada
U.S.
Japan
G0H0
G0G0
G0K0
G0F0
G0D0
G0R0
G0I0
G0LV
G0LU
G0N0
G0SL
G0SV
G0E0
EG00
G0M0
G0W0
G0S0
G0L0
W0GN
W0GE
G0T0
G0C0
G0Q0
G0Y0
1.85
1.91
1.47
1.65
1.69
1.44
1.30
1.73
1.66
1.86
1.36
2.19
1.97
1.64
2.09
1.50
1.02
3.15
2.93
1.95
0.63
0.74
1.02
0.27
1.87
1.93
1.48
1.66
1.71
1.46
1.31
1.75
1.68
1.88
1.38
2.22
1.99
1.66
2.11
1.51
1.03
3.19
2.96
1.98
0.63
0.75
1.03
0.27
1.90
1.96
1.52
1.70
1.75
1.49
1.34
1.79
1.71
1.92
1.41
2.25
2.03
1.69
2.15
1.55
1.07
3.23
3.00
2.01
0.67
0.78
1.07
0.30
1.85
1.91
1.47
1.64
1.69
1.44
1.29
1.73
1.66
1.87
1.36
2.20
1.97
1.64
2.09
1.49
1.02
3.17
2.94
1.96
0.62
0.73
1.02
0.26
7.08
8.36
5.90
7.04
5.80
8.23
8.81
0.00
7.35
6.68
5.74
11.77
10.29
7.68
6.16
5.83
4.71
5.46
5.50
7.19
1.64
2.97
2.74
1.43
7.19
8.47
5.98
7.14
5.89
8.28
8.85
0.00
7.44
6.77
5.74
11.73
10.37
7.76
6.26
5.92
4.80
5.59
5.62
7.28
1.69
3.05
2.79
1.45
7.32
8.60
6.12
7.27
6.03
8.41
9.00
0.00
7.57
6.92
5.91
11.92
10.51
7.90
6.40
6.06
4.95
5.75
5.78
7.42
1.83
3.19
2.95
1.62
6.90
8.17
5.71
6.86
5.61
8.03
8.63
0.00
7.15
6.50
5.59
11.62
10.09
7.50
5.97
5.65
4.52
5.30
5.33
7.00
1.46
2.77
2.55
1.27
GLOBAL GOVERNMENTS
Global, Ex Base Currency
W0G1
1.16
1.23
1.17
0.98
1.20
1.03
1.15
1.48
4.02
4.67
4.07
2.65
4.23
4.10
3.83
4.77
Source: BofA Merrill Lynch Bond Indices
12
N0G1
N0Q1
N0L1
N0Y1
N0G1
N0Q1
N0L1
N0Y1
Bond Indic es
05 Septem ber 2014
Table 9: Global Government Index Return Attributions by Sector
Month-to-Date
Ticker
Global Government W0G1
Europe - EMU
Austria
G0H0
Belgium
G0G0
Finland
G0K0
France
G0F0
Germany
G0D0
Ireland
G0R0
Italy
G0I0
Latv ia
G0LV
Lux embourg
G0LU
Netherlands
G0N0
Slov akia
G0SL
Slov enia
G0SV
Spain
G0E0
EMU Direct Govt EG00
Europe – Non-EMU
Denmark
G0M0
Sw eden
G0W0
Sw itzerland
G0S0
U.K.
G0L0
Dollar Bloc
Australia
G0T0
Canada
G0C0
U.S.
G0Q0
Japan
G0Y0
Year-to-Date
Ticker
Global Government W0G1
Europe - EMU
Austria
G0H0
Belgium
G0G0
Finland
G0K0
France
G0F0
Germany
G0D0
Greece
G0GR
Ireland
G0R0
Italy
G0I0
Latv ia
G0LV
Lux embourg
G0LU
Portugal
G0U0
Slov akia
G0SL
Slov enia
G0SV
Spain
G0E0
Europe – Non-EMU
Denmark
G0M0
Sw eden
G0W0
Sw itzerland
G0S0
U.K.
G0L0
Dollar Bloc
Australia
G0T0
Canada
G0C0
U.S.
G0Q0
Japan
G0Y0
Coupon
Amort./Roll
Curve Shift
Curve Reshape
Spread Change
Change in
Imp Vol
Total
Return
Excess Return
0.26%
0.27%
0.20%
0.24%
0.20%
0.33%
0.31%
0.22%
0.20%
0.21%
0.28%
0.32%
0.32%
0.26%
-0.12%
-0.12%
-0.07%
-0.11%
-0.09%
-0.17%
-0.10%
0.05%
-0.02%
-0.09%
-0.11%
-0.08%
-0.12%
-0.10%
2.14%
2.08%
1.84%
1.96%
1.93%
1.45%
1.77%
2.00%
1.88%
2.01%
1.73%
1.38%
1.71%
1.88%
-0.13%
-0.08%
-0.25%
-0.14%
-0.14%
-0.44%
-0.19%
-0.30%
-0.39%
-0.14%
-0.21%
-0.41%
-0.23%
-0.17%
-0.02%
0.04%
-0.03%
-0.05%
0.00%
0.60%
-0.17%
0.00%
0.21%
0.11%
-0.04%
1.32%
0.64%
0.05%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
2.12%
2.19%
1.69%
1.90%
1.91%
1.79%
1.62%
1.97%
1.88%
2.10%
1.66%
2.53%
2.31%
1.92%
0.01%
0.09%
0.01%
-0.01%
0.02%
0.67%
-0.04%
0.14%
0.29%
0.13%
0.05%
1.47%
0.74%
0.12%
0.25%
0.26%
0.19%
0.29%
-0.11%
-0.12%
-0.11%
-0.04%
2.26%
1.46%
1.21%
3.16%
-0.05%
0.17%
0.00%
0.12%
-0.01%
0.02%
-0.09%
-0.01%
0.00%
0.00%
0.00%
0.00%
2.35%
1.79%
1.21%
3.52%
0.00%
0.02%
-0.07%
-0.03%
0.37%
0.22%
0.19%
0.10%
-0.07%
-0.04%
0.02%
-0.02%
0.85%
0.93%
1.17%
0.30%
0.06%
-0.08%
-0.16%
-0.02%
0.00%
0.00%
-0.01%
-0.01%
0.00%
0.00%
0.00%
0.00%
1.21%
1.03%
1.22%
0.36%
0.02%
0.01%
0.00%
-0.02%
Coupon
Amort./Roll
Curve Shift
Curve Reshape
Spread Change
Change in
Imp Vol
Total Return
Excess Return
2.25%
2.38%
1.80%
2.10%
1.69%
2.61%
2.94%
2.78%
n.a.
1.73%
3.22%
2.41%
2.91%
2.84%
-0.83%
-0.77%
-0.43%
-0.68%
-0.56%
3.28%
-0.99%
-0.58%
n.a.
0.17%
-0.42%
-0.66%
-0.30%
-0.74%
7.24%
7.28%
6.28%
6.82%
6.68%
12.22%
5.25%
6.26%
n.a.
6.93%
5.22%
6.09%
5.17%
5.94%
-0.15%
-0.01%
-0.28%
-0.19%
-0.22%
1.31%
-0.63%
-0.25%
n.a.
-0.05%
-0.77%
-0.14%
-0.63%
-0.40%
0.92%
1.98%
0.41%
1.18%
-0.01%
11.05%
4.65%
3.43%
n.a.
0.39%
11.19%
0.45%
7.49%
5.58%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
n.a.
0.00%
0.00%
0.00%
0.00%
0.00%
9.44%
10.85%
7.78%
9.23%
7.57%
30.47%
11.22%
11.63%
n.a.
9.17%
18.45%
8.15%
14.63%
13.21%
1.26%
2.51%
0.71%
1.58%
0.10%
16.58%
5.69%
4.75%
n.a.
0.94%
13.44%
1.11%
9.35%
6.90%
2.17%
2.27%
1.69%
2.49%
-0.80%
-0.77%
-0.91%
-0.29%
6.89%
6.85%
5.42%
5.86%
0.02%
0.32%
0.03%
0.24%
-0.02%
-0.08%
0.06%
-0.06%
0.00%
0.00%
0.00%
0.00%
8.24%
8.58%
6.28%
8.24%
0.03%
-0.13%
0.20%
-0.04%
3.18%
1.85%
1.57%
0.82%
-0.44%
-0.29%
0.17%
-0.11%
3.59%
4.26%
3.63%
1.35%
0.24%
-0.30%
-1.05%
0.05%
0.00%
0.00%
0.00%
-0.02%
0.00%
0.00%
0.00%
0.00%
6.56%
5.52%
4.32%
2.09%
0.05%
0.04%
0.02%
-0.05%
0.20%
1.66%
-0.03%
-0.19%
1.29%
4.05%
-0.10%
-0.39%
0.01%
0.57%
0.00%
0.00%
1.37%
5.70%
0.03%
0.76%
See “ Bond Index Rules & Definitions” for a description of the return attribution methodology.
Source: BofA Merrill Lynch Bond Indices
13
Bond Indic es
05 Septem ber 2014
Country weights & durations
U.S. Treasury Index sees typically large
August rebalancing extension.
Despite a net outflow, currency gains
offset leave the U.S. weight unchanged
M OM.
The same is true of Japan’s weighting,
but for different reasons.
The euro sovereign index was little
changed at the rebalancing, with a
0.07yr M OM duration extension.
The sizable Gilt rally helped push the
duration up 0.33yrs M OM.
Sweden’s lost a short bond at the
rebalancing – an 11% holding – that
triggered a 0.77yr duration extension.
The August rebalancing extended the duration of the US Treasury Index by 0.13
years – close to the +0.17 year historical average for the month. The
corresponding $51bn net outflow was mostly due to the sizable amount of coupon
cash flow being removed (-$39bn), and was enough to shrink the U.S. share of
the Global Government Index by 0.20% at month end. But this was more than
offset by the increase in weighting the U.S. accumulated over the course of the
month due primarily to currency appreciation. During August the U.S. dollar
gained 1.6% vs the euro and 1.0% vs the Japanese yen. The net impact of this
combined with the rebalancing was USD weighting that was little changed MOM
(+0.04%). Quite the opposite of the U.S. experience, the market cap of the Japan
Government Index increased $76bn at the rebalancing. But the impact of a lower
return and currency depreciation during the most leaves the JGB weighting
almost exactly unchanged MOM (-0.01%).
The Euro Government Index experienced a minor $11bn net outflow at the
rebalancing, and a correspondingly modest 0.04 year duration extension – right in
line with the long-term average for August (+0.04yrs). The largest concentrated
outflow was Italy (-$32bn), which also had the largest duration shift (+0.14yrs).
The sizable 20bp yield rally during the month overwhelmed the roll-down effect
and caused duration to shift slightly longer (+0.07yrs MOM). The sterling
segment saw a typically quiet August rebalancing, with the UK Gilt Index duration
extending 0.09 years on a modest $6bn net outflow. The outflow is actually the
result of a particularly large amount of coupon cash flow (-$17bn), typical for
February and August. However, the significant 31bp August yield rally on the
index pushed duration out 0.24 years, resulting in a net 0.33 year duration
extension MOM. Sweden topped that with a 0.77 year MOM duration extension
as the 4.5% 8/12/2015 bond was removed at the rebalancing – roughly 11% of
the index.
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Aug-04
Jan-05
Jun-05
Nov-05
Apr-06
Sep-06
Feb-07
Jul-07
Dec-07
May-08
Oct-08
Mar-09
Aug-09
Jan-10
Jun-10
Nov-10
Apr-11
Sep-11
Feb-12
Jul-12
Dec-12
May-13
Oct-13
Mar-14
Aug-14
Chart 8: Global Government Index Allocation
Japan
Source: BofA Merrill Lynch Indices
14
US
Euro
All Other
Bond Indic es
05 Septem ber 2014
Table 10: Global Government Bond Index Structure
31-Aug-14
Change vs Prior Month
Austria
Belgium
Finland
France
Germany
Ireland
Italy
Latv ia
Lux embourg
Netherlands
Slov akia
Slov enia
Spain
Sub-Total: EMU
Denmark
Sw eden
Sw itzerland
U.K.
Sub-Total: Non-EMU
Pan-Europe
Australia
Canada
U.S.
Japan
Ticker
G0H0
G0G0
G0K0
G0F0
G0D0
G0R0
G0I0
G0LV
G0LU
G0N0
G0SL
G0SV
G0E0
EG00
G0M0
G0W0
G0S0
G0L0
W0GN
W0GE
G0T0
G0C0
G0Q0
G0Y0
% Weight
1.06%
1.78%
0.40%
6.60%
5.40%
0.53%
6.58%
0.01%
0.03%
1.69%
0.16%
0.08%
3.51%
27.83%
0.53%
0.32%
0.39%
7.73%
8.98%
36.81%
1.11%
1.47%
34.08%
26.53%
EffDur
7.95
7.76
6.76
7.30
7.19
5.34
6.67
7.24
6.80
7.50
6.37
5.07
6.37
7.02
8.18
6.93
9.25
10.00
9.75
7.69
5.40
7.06
6.03
8.37
DurCont
0.08
0.14
0.03
0.48
0.39
0.03
0.44
0.00
0.00
0.13
0.01
0.00
0.22
1.95
0.04
0.02
0.04
0.77
0.88
2.83
0.06
0.10
2.05
2.22
EffConx
1.22
1.07
0.77
1.05
1.00
0.39
0.78
0.62
0.54
1.06
0.64
0.38
0.74
0.92
1.28
0.82
1.55
1.97
1.87
1.15
0.46
1.09
0.81
1.27
Global Government
W0G1
100.00%
7.27
7.27
1.06
EffYld OAS
0.74
12
0.91
25
0.63
12
0.78
20
0.56
0
0.97
61
1.74 118
1.89 128
0.73
21
0.66
9
1.14
60
1.76 141
1.46
94
1.06
49
0.76
2
0.94
-2
0.43
0
2.12
0
1.92
0
1.27
37
2.99
0
1.66
0
1.51
-1
0.50
0
1.17
13
% Weight
0.01%
0.00%
0.00%
-0.01%
0.05%
-0.01%
-0.16%
0.00%
0.00%
0.00%
0.00%
0.00%
0.02%
-0.09%
0.01%
-0.04%
0.00%
0.08%
0.05%
-0.05%
0.04%
-0.01%
0.04%
-0.01%
EffDur
0.08
0.05
0.00
0.05
0.04
-0.01
0.13
-0.08
-0.08
0.07
-0.03
-0.03
0.05
0.07
0.11
0.77
0.02
0.33
0.33
0.14
-0.01
0.16
0.15
-0.02
DurCont
0.00
0.00
0.00
0.00
0.01
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.01
0.00
0.00
0.00
0.03
0.03
0.05
0.00
0.00
0.05
-0.01
EffConx
0.04
0.02
0.01
0.03
0.02
0.00
0.02
-0.01
-0.01
0.03
0.00
0.00
0.02
0.02
0.03
0.11
0.01
0.11
0.11
0.04
0.00
0.04
0.04
0.00
0.00%
0.10
0.10
0.03
EffYld OAS
-0.20
-1
-0.20
-1
-0.18
-1
-0.18
0
-0.18
0
-0.25
-8
-0.17
1
-0.24
0
-0.25
-3
-0.19
-1
-0.20
-2
-0.38
-22
-0.25
-9
-0.20
-2
-0.21
-1
-0.11
0
-0.08
0
-0.29
0
-0.26
0
-0.21
-2
-0.14
0
-0.07
0
-0.10
1
-0.02
0
-0.12
-1
Source: BofA Merrill Lynch Bond Indices
15
Bond Indic es
05 Septem ber 2014
Other high grade sovereign indices
South Africa led gains in August, followed
by Brazil.
Chile and Israel also posted strong
returns.
Russia slid another 1%, with currency
weakness compounding the bond losses.
Of markets not represented in the Global Government Index, South Africa
(2.67%) led the rankings in August. South Africa was helped by a number of
factors, including a lower-than-expected rise in GDP and a flight to quality
following the collapse of a microlender. Brazil (2.20%) posted a seventh
consecutive positive monthly total return and is now the best-performing high
grade sovereign market we track YTD (11.66%). Both Chile (1.96%) and Israel
(1.88%) posted strong runner-up performances. Chile’s economic deceleration
continues apace, and Israel’s central bank unexpectedly cut rates for a second
straight month. All the months losses are in the EMEA region, but Russia (0.95%) is – without surprise – in a class of its own. Russia’s debt fell sharply in
the last few days of August, as it became clear that the Ukraine conflict was far
from over. The 1% setback adds to prior losses, now totaling 4% YTD. Currency
erosion about quadruples those losses for USD based investors (-4.70% Aug; 14.96% YTD).
Chart 9: Other Countries (Not in the Global Government Index) Local Returns
3.0
2.5
Return %
2.0
1.5
1.0
0.5
0.0
-0.5
Total Return
Source: BofA Merrill Lynch Bond Indices
16
Russia
Romania
Turkey
Indonesia
Malaysian
Global Government Index
Philippines
Morocco
Taiwan
Norway
India
China
Thailand
Hong Kong
Singapore
Czech
New Zealand
Chile
Colombia
Brazil
-1.5
South Africa
-1.0
Bond Indic es
05 Septem ber 2014
Table 11: Local currency sovereign index total returns
Total return - unhedged:
Europe/Middle East/Africa:
Czech Rep.
Israel
Morocco
Norw ay
Poland
Romania
Russia
South Africa
Turkey
Asia/Pacific:
China
Hong Kong
India
Indonesia
Malay sia
New Zealand
Philippines
Singapore
South Korea
Taiw an
Thailand
Americas:
Brazil
Chile
Colombia
Mex ico
Total return - hedged:
Europe/Middle East/Africa:
Czech Rep.
Israel
Morocco
Norw ay
Poland
Romania
Russia
South Africa
Turkey
Asia/Pacific:
China
Hong Kong
India
Indonesia
Malay sia
New Zealand
Philippines
Singapore
South Korea
Taiw an
Thailand
Americas:
Brazil
Chile
Colombia
Mex ico
Ticker
Local
EUR
31-Aug-14
JPY
GBP
USD
Local
EUR
YTD
JPY
GBP
USD
G0CZ
G0IS
G0MA
G0J0
G0PL
G0RO
G0RU
G0SA
G0TR
1.29
1.88
0.32
0.33
1.55
-0.31
-0.95
2.67
-0.20
0.97
-0.61
0.83
3.90
0.74
0.37
-3.19
5.09
0.78
0.42
-1.16
0.28
3.33
0.19
-0.18
-3.72
4.51
0.22
1.05
-0.54
0.91
3.99
0.82
0.45
-3.12
5.17
0.86
-0.60
-2.16
-0.73
2.29
-0.82
-1.19
-4.70
3.45
-0.79
6.65
8.33
8.47
4.87
6.92
6.46
-4.01
7.21
11.13
5.19
10.23
9.58
7.74
5.55
8.08
-11.04
10.45
15.74
-0.62
4.15
3.53
1.80
-0.27
2.12
-15.95
4.36
9.36
0.28
5.09
4.47
2.71
0.63
3.03
-15.19
5.30
10.34
0.55
5.37
4.75
2.99
0.90
3.31
-14.96
5.58
10.64
G0CN
G0HK
G0IN
G0ID
G0MY
G0Z0
G0PH
G0SP
G0SK
G0TW
G0TH
0.58
0.73
0.36
0.09
0.24
1.04
0.13
1.01
0.37
0.34
0.61
2.70
2.32
1.68
0.63
3.24
1.22
1.43
2.60
3.35
2.26
2.75
2.13
1.76
1.12
0.07
2.67
0.67
0.87
2.03
2.78
1.70
2.18
2.78
2.40
1.76
0.71
3.32
1.30
1.51
2.68
3.43
2.34
2.83
1.10
0.73
0.10
-0.94
1.64
-0.35
-0.15
1.00
1.74
0.67
1.15
5.85
2.36
8.34
8.29
3.54
4.77
0.36
3.49
5.45
1.58
5.32
9.13
7.14
15.53
17.87
12.55
11.47
6.87
9.53
14.82
5.96
13.36
3.10
1.22
9.15
11.36
6.34
5.32
0.97
3.49
8.48
0.11
7.10
4.03
2.13
10.14
12.36
7.30
6.27
1.88
4.42
9.46
1.01
8.06
4.31
2.41
10.44
12.67
7.59
6.55
2.16
4.70
9.76
1.29
8.36
G0BR
G0CL
G0CO
G0MX
2.20
1.96
1.38
1.01
5.13
0.50
0.76
3.84
4.56
-0.06
0.21
3.27
5.22
0.58
0.84
3.92
3.50
-1.07
-0.81
2.23
11.66
8.51
5.40
8.59
23.16
0.86
11.04
13.78
16.36
-4.71
4.91
7.51
17.41
-3.85
5.86
8.47
17.73
-3.59
6.14
8.77
G0CZ
G0IS
G0MA
G0J0
G0PL
G0RO
G0RU
G0SA
G0TR
1.30
1.86
-0.05
0.22
1.33
-0.52
-1.72
2.22
-0.90
1.29
1.84
-0.06
0.21
1.31
-0.52
-1.72
2.19
-0.91
1.34
1.90
-0.01
0.25
1.36
-0.48
-1.68
2.25
-0.87
1.29
1.84
-0.04
0.22
1.31
-0.50
-1.69
2.18
-0.89
6.84
8.09
6.29
3.86
5.31
4.98
-8.80
3.54
4.66
6.62
7.87
6.10
3.62
5.24
4.80
-8.88
3.59
4.48
6.99
8.25
6.45
3.99
5.49
5.10
-8.63
3.75
4.77
6.80
8.00
6.27
3.80
5.34
4.95
-8.72
3.58
4.66
G0CN
G0HK
G0IN
G0ID
G0MY
G0Z0
G0PH
G0SP
G0SK
G0TW
G0TH
0.30
0.74
-0.37
-0.47
-0.01
0.73
0.06
1.02
0.20
0.36
0.47
0.29
0.73
-0.38
-0.48
-0.02
0.71
0.05
1.00
0.19
0.35
0.46
0.34
0.77
-0.33
-0.44
0.02
0.76
0.09
1.05
0.23
0.39
0.51
0.30
0.74
-0.36
-0.46
-0.01
0.72
0.07
1.01
0.20
0.36
0.47
4.61
2.38
2.41
4.09
1.81
2.67
0.18
3.52
4.09
2.14
4.15
4.39
2.21
2.19
4.15
1.66
2.45
0.14
3.32
3.93
1.98
4.00
4.76
2.55
2.54
4.31
1.97
2.82
0.39
3.68
4.24
2.33
4.32
4.61
2.37
2.34
4.18
1.80
2.61
0.17
3.48
4.07
2.14
4.14
G0BR
G0CL
G0CO
G0MX
1.36
1.58
1.04
0.80
1.34
1.56
1.02
0.78
1.40
1.61
1.07
0.83
1.33
1.56
1.03
0.79
4.49
5.47
3.87
6.64
4.37
5.22
3.79
6.51
4.64
5.60
4.08
6.80
4.49
5.38
3.85
6.65
Source: BofA Merrill Lynch Bond Indices
17
Bond Indic es
05 Septem ber 2014
Table 12: Local currency sovereign index price returns
Price return - unhedged:
Europe/Middle East/Africa:
Czech Rep.
Israel
Morocco
Norw ay
Poland
Romania
Russia
South Africa
Turkey
Asia/Pacific:
China
Hong Kong
India
Indonesia
Malay sia
New Zealand
Philippines
Singapore
South Korea
Taiw an
Thailand
Americas:
Brazil
Chile
Colombia
Mex ico
Price return - hedged:
Europe/Middle East/Africa:
Czech Rep.
Israel
Morocco
Norw ay
Poland
Romania
Russia
South Africa
Turkey
Asia/Pacific:
China
Hong Kong
India
Indonesia
Malay sia
New Zealand
Philippines
Singapore
South Korea
Taiw an
Thailand
Americas:
Brazil
Chile
Colombia
Mex ico
Source: BofA Merrill Lynch Bond Indices
18
31-Aug-14
EUR
JPY
GBP
USD
Local
EUR
YTD
JPY
GBP
USD
1.00
1.52
-0.06
0.04
1.21
-0.76
-1.58
1.96
-0.93
0.69
-0.96
0.45
3.61
0.41
-0.08
-3.81
4.36
0.04
0.13
-1.50
-0.10
3.04
-0.14
-0.63
-4.34
3.79
-0.51
0.76
-0.88
0.53
3.69
0.49
0.00
-3.73
4.44
0.12
-0.88
-2.50
-1.11
2.00
-1.15
-1.63
-5.30
2.74
-1.52
4.19
5.28
5.23
2.39
4.10
2.73
-8.53
1.32
4.91
2.76
7.13
6.31
5.20
2.78
4.28
-15.23
4.39
9.27
-2.91
1.21
0.44
-0.61
-2.90
-1.47
-19.90
-1.38
3.24
-2.04
2.13
1.35
0.29
-2.02
-0.58
-19.18
-0.49
4.17
-1.77
2.40
1.62
0.56
-1.76
-0.31
-18.96
-0.22
4.45
G0CN
G0HK
G0IN
G0ID
G0MY
G0Z0
G0PH
G0SP
G0SK
G0TW
G0TH
0.26
0.61
-0.32
-0.60
-0.09
0.62
-0.31
0.79
0.05
0.16
0.27
2.36
2.19
0.99
-0.07
2.91
0.80
0.98
2.38
3.02
2.08
2.40
1.80
1.63
0.43
-0.62
2.34
0.25
0.43
1.81
2.46
1.52
1.83
2.44
2.27
1.07
0.01
2.99
0.88
1.06
2.46
3.10
2.16
2.48
0.77
0.61
-0.58
-1.62
1.31
-0.76
-0.59
0.78
1.42
0.49
0.81
3.18
1.36
2.57
2.47
0.90
1.29
-3.18
1.71
2.76
0.16
2.52
6.37
6.08
9.38
11.53
9.69
7.77
3.11
7.65
11.89
4.48
10.34
0.50
0.23
3.34
5.37
3.64
1.82
-2.58
1.71
5.71
-1.29
4.25
1.41
1.13
4.27
6.32
4.57
2.74
-1.71
2.63
6.67
-0.40
5.19
1.68
1.41
4.55
6.61
4.85
3.02
-1.44
2.90
6.95
-0.13
5.47
G0BR
G0CL
G0CO
G0MX
1.81
1.50
0.76
0.44
4.73
0.05
0.14
3.26
4.15
-0.50
-0.41
2.69
4.81
0.13
0.22
3.34
3.10
-1.51
-1.42
1.65
8.38
4.54
0.42
3.87
19.54
-2.84
5.79
8.84
12.95
-8.20
-0.05
2.83
13.96
-7.37
0.85
3.76
14.27
-7.12
1.13
4.04
G0CZ
G0IS
G0MA
G0J0
G0PL
G0RO
G0RU
G0SA
G0TR
1.01
1.52
-0.43
-0.08
1.00
-0.97
-2.33
1.49
-1.64
1.00
1.50
-0.44
-0.09
0.98
-0.97
-2.33
1.47
-1.64
1.05
1.55
-0.40
-0.04
1.03
-0.93
-2.30
1.53
-1.60
1.01
1.50
-0.42
-0.07
0.99
-0.95
-2.30
1.47
-1.61
4.38
5.04
3.11
1.40
2.54
1.28
-13.08
-2.20
-1.27
4.19
4.84
2.94
1.18
2.49
1.13
-13.13
-2.11
-1.40
4.54
5.21
3.27
1.54
2.73
1.42
-12.89
-1.96
-1.13
4.35
4.97
3.10
1.35
2.58
1.27
-12.98
-2.12
-1.23
G0CN
G0HK
G0IN
G0ID
G0MY
G0Z0
G0PH
G0SP
G0SK
G0TW
G0TH
-0.03
0.61
-1.06
-1.17
-0.35
0.31
-0.39
0.79
-0.13
0.17
0.12
-0.04
0.60
-1.06
-1.17
-0.36
0.30
-0.39
0.78
-0.14
0.17
0.11
0.00
0.65
-1.02
-1.13
-0.32
0.34
-0.35
0.83
-0.10
0.21
0.16
-0.03
0.61
-1.04
-1.15
-0.34
0.31
-0.37
0.79
-0.12
0.18
0.13
1.96
1.37
-3.12
-1.60
-0.82
-0.78
-3.37
1.73
1.40
0.70
1.34
1.76
1.21
-3.30
-1.50
-0.94
-0.96
-3.39
1.54
1.26
0.55
1.22
2.12
1.54
-2.97
-1.35
-0.64
-0.60
-3.15
1.90
1.56
0.90
1.53
1.97
1.36
-3.16
-1.48
-0.81
-0.81
-3.36
1.70
1.39
0.71
1.36
G0BR
G0CL
G0CO
G0MX
0.95
1.13
0.42
0.21
0.93
1.11
0.40
0.20
0.99
1.17
0.45
0.25
0.93
1.12
0.41
0.22
1.36
1.62
-1.08
1.96
1.28
1.41
-1.12
1.87
1.53
1.77
-0.85
2.14
1.38
1.55
-1.07
2.00
Ticker
Local
G0CZ
G0IS
G0MA
G0J0
G0PL
G0RO
G0RU
G0SA
G0TR
Bond Indic es
05 Septem ber 2014
Table 13: Local currency sovereign index characteristics
Europe/Middle
East/Africa:
Czech Republic
Israel
Morocco
Norw ay
Poland
Romania
Russia
South Africa
Turkey
Asia/Pacific:
China
Hong Kong
India
Indonesia
Malay sia
New Zealand
Philippines
Singapore
South Korea
Taiw an
Thailand
Americas:
Brazil
Chile
Colombia
Mex ico
31-Aug-14
Change vs Prior Month
Ticker Issues Mkt Val EffDur Convx Yld Issues Mkt Val EffDur Convx Yld
G0CZ
G0IS
G0MA
G0J0
G0PL
G0RO
G0RU
G0SA
G0TR
13
13
45
5
17
10
31
13
16
46,891
60,920
31,963
47,545
109,476
21,593
72,866
90,991
80,268
5.62
5.38
4.71
5.43
4.01
3.15
4.29
6.36
3.70
0.51
0.52
0.37
0.40
0.27
0.17
0.30
0.73
0.22
0.74
1.47
3.84
1.84
2.53
3.18
9.57
7.76
8.84
0
0
0
0
0
0
0
0
0
-833
-847
-422
1,576
-907
-131
-4,685
2,634
1,047
0.03
0.04
-0.06
-0.05
-0.05
-0.07
-0.07
0.11
-0.10
0.01
0.02
-0.01
0.00
0.00
0.00
-0.01
0.03
-0.01
-0.17
-0.31
0.00
0.00
-0.32
0.31
0.40
-0.31
0.32
G0CN
G0HK
G0IN
G0ID
G0MY
G0Z0
G0PH
G0SP
G0SK
G0TW
G0TH
144
63
70
40
79
6
64
16
30
87
34
983,401
14,919
553,050
78,192
181,427
48,057
81,956
64,190
414,628
165,301
88,966
6.86
3.91
5.83
6.59
5.06
4.95
7.62
6.92
5.99
9.03
7.35
0.92
0.27
0.60
0.71
0.41
0.33
0.94
0.77
0.69
1.35
1.07
4.19
0.96
8.72
8.36
3.80
3.99
4.16
1.64
2.80
1.45
3.27
0 12,613
2
742
0 4,086
0
944
-2
178
0
-8
-2 -3,805
0 2,085
0 14,062
1 1,721
0 2,522
0.04
0.00
-0.03
-0.06
0.06
-0.08
0.08
0.08
-0.04
0.15
0.01
0.01
0.01
0.00
-0.01
0.00
-0.01
0.02
0.01
0.00
0.04
0.01
-0.02
-0.14
0.09
0.10
0.04
-0.12
0.05
-0.05
-0.02
-0.01
-0.05
G0BR
G0CL
G0CO
G0MX
16
18
15
19
212,817
11,390
77,402
165,328
2.85
4.82
4.61
5.94
0.14 10.96
0.02 3.78
0.35 5.80
0.66 5.18
0
0
1
0
-0.01
-0.02
-0.05
-0.06
0.00
0.00
0.00
0.00
-0.33
-0.34
-0.18
-0.06
9,730
-217
-39
6,654
Source: BofA Merrill Lynch Bond Indices
19
Bond Indic es
05 Septem ber 2014
Inflation-linked indices
Inflation-linked sovereigns posted strong
gains practically across the board in
August. The Developed M arkets segment
posted a 2.02% total return, led by the
U.K. (5.30%) – the best performer in the
entire index this past month. Only two
markets fell into the red: Japan and
Korea. The Emerging M arkets segment
not only did better than its developed
counterpart in total return, but also
relative to nominals. M uch of that is due
to Brazil (4.68%, +1.85% excess) – by far
the sector’s largest constituent – but
Chile and South Africa were also
particularly strong performers. Of the
Developed M arket contingent, only New
Zealand and Spain were able to
outperform equivalent nominals.
Table 14: Global Diversified Inflation-Linked Government Index
Change in
IL Total
IL Total
Country
Real Yield Return MTD Return YTD
Australia
Canada
* Denmark
France
Germany
Italy
Japan
New Zealand
* Spain
Sw eden
United Kingdom
United States
Dev eloped Markets
Brazil
Chile
Colombia
Israel
Mex ico
Poland
South Africa
South Korea
Thailand
Turkey
Emerging Markets
Total
-12
-2
-27
-12
-4
-29
-3
-27
-31
-5
-27
4
5
-52
-49
-5
-17
-11
-1
-15
19
-12
-5
-30
-13
1.51
0.65
2.36
1.32
0.58
1.39
-0.13
2.17
3.13
1.29
5.30
0.55
2.02
4.68
4.02
0.79
1.46
1.33
0.35
2.19
-1.15
1.06
0.37
3.02
2.21
8.67
14.51
5.74
7.40
3.53
11.16
4.72
7.81
6.75
7.47
10.74
6.74
8.36
15.64
13.19
6.37
6.78
8.81
2.16
8.57
5.91
9.47
15.76
12.64
9.15
IL Excess
Return MTD
-0.21
-2.77
-0.09
-0.52
-0.20
-0.17
-0.10
1.39
0.93
-0.08
-0.04
-1.71
-0.88
1.85
3.47
0.40
-0.64
-0.02
-0.43
2.02
-1.44
0.72
-0.11
1.13
-0.50
IL Excess
Return YTD
-0.25
-2.95
0.83
0.17
-0.16
4.97
4.68
3.06
2.80
1.88
-1.62
-1.43
-0.59
5.43
9.33
4.66
-1.19
1.24
-2.21
3.74
1.96
7.01
8.59
4.49
0.36
Source: BofA Merrill Lynch Bond Indices
Table 15: Global Diversified Inflation-Linked Government Index composition
31-Aug-14
Australia
Canada
Denmark
France
Germany
Italy
Japan
New Zealand
Spain
Sw eden
United Kingdom
United States
Dev eloped Markets
Brazil
Chile
Colombia
Israel
Mex ico
Poland
South Africa
South Korea
Thailand
Turkey
Emerging Markets
Global Diversified IL Index
Source: BofA Merrill Lynch Bond Indices
20
Issues
7
7
1
15
5
10
7
3
1
6
24
38
124
14
32
5
11
10
2
9
4
2
14
103
227
MktVal ($MM)
31,447
63,266
6,367
289,128
95,133
184,984
33,780
10,076
8,695
34,693
726,954
1,126,463
2,610,985
307,324
34,326
21,611
59,427
85,759
2,574
34,080
9,048
5,603
60,158
619,910
3,230,894
Real Yield
0.87
0.39
-0.31
-0.32
-0.35
0.90
-1.75
2.34
0.97
-0.16
-0.61
-0.03
-0.16
5.17
1.21
2.86
0.34
1.64
1.47
1.72
1.34
1.61
2.37
3.36
0.51
Change vs prior month
Nom. Dur
6.81
14.66
8.31
5.95
3.49
5.77
-4.24
3.34
7.38
4.59
12.60
7.75
8.55
2.07
2.22
0.73
5.06
3.94
1.83
-0.47
3.98
2.21
1.03
2.36
7.36
Issues
0
0
0
0
0
-1
0
0
n.a.
0
0
0
-1
0
1
0
0
0
0
0
0
0
0
1
0
MktVal ($MM) Real Yield
960
-0.12
1,095
-0.02
55
-0.27
-637
-0.12
-914
-0.04
-24,780
-0.30
-773
-0.03
241
-0.26
n.a.
n.a.
290
-0.05
26,916
-0.27
22,335
0.04
24,923
-0.11
12,112
-0.54
757
-0.49
-111
-0.05
-1,202
-0.17
2,789
-0.12
-123
0.00
1,358
-0.15
9
0.19
90
-0.12
-368
-0.04
15,310
-0.30
40,233
-0.15
Nom. Dur
-0.50
-0.61
0.80
0.16
0.02
0.81
1.38
1.19
n.a.
0.14
-0.85
-0.32
-0.20
0.24
1.67
0.71
-0.25
-0.47
0.00
0.51
0.31
0.48
-0.08
0.16
-0.15
Bond Indic es
05 Septem ber 2014
Currency & money market indices
Table 16: Spot Currency Returns
Currency
Australian Dollar
British Pound
Canadian Dollar
Chinese Yuan
Chilean Peso
Czech Koruna
Danish Krone
Euro
Hong Kong Dollar
Hungarian Forint
Israel Shekel
Japanese Yen
Malay sian Ringgit
Mex ican Peso
New Zealand Dollar
Norw egian Krone
Polish Zloty
Russian Ruble
Singapore Dollar
South African Rand
South Korean Won
Sw edish Krona
Sw iss Franc
Taiw an Dollar
Thailand Bhat
US Dollar
31-Aug-14
Ticker
$ADY
$BPY
$CDY
$CNY
$CLP
$CKY
$DKY
$EUR
$HDY
$HFY
$ILS
$JYY
$MRY
$MXN
$NDY
$NKY
$PZY
$RUB
$SGY
$ZAY
$KWY
$SKY
$SFY
$TWY
$THB
$USD
US Dollar
0.60
-1.63
0.36
0.51
-2.97
-1.87
-1.49
-1.56
0.00
-1.91
-3.96
-1.01
1.40
1.21
-1.37
1.96
-2.33
-3.79
-0.01
0.76
1.37
-0.94
-0.72
0.33
0.53
0.00
Euro
2.19
-0.08
1.94
2.10
-1.44
-0.32
0.07
0.00
1.58
-0.36
-2.44
0.55
3.00
2.80
0.19
3.57
-0.79
-2.27
1.57
2.35
2.97
0.63
0.85
1.92
2.12
1.58
YTD
Sterling
2.27
0.00
2.02
2.18
-1.36
-0.24
0.15
0.08
1.66
-0.29
-2.37
0.63
3.08
2.88
0.26
3.65
-0.71
-2.19
1.65
2.43
3.05
0.71
0.93
2.00
2.20
1.66
Yen
1.63
-0.63
1.38
1.54
-1.98
-0.86
-0.48
-0.55
1.02
-0.91
-2.98
0.00
2.43
2.24
-0.37
3.00
-1.33
-2.81
1.01
1.79
2.41
0.08
0.30
1.36
1.56
1.02
US Dollar
4.54
0.27
-2.05
-1.45
-11.15
-5.72
-4.28
-4.41
0.05
-9.98
-2.73
1.17
3.92
0.17
1.71
-1.79
-5.63
-11.41
1.17
-1.52
4.08
-7.87
-2.89
-0.29
2.88
0.00
Euro
9.37
4.90
2.47
3.09
-7.05
-1.37
0.14
0.00
4.66
-5.83
1.76
5.84
8.71
4.79
6.40
2.74
-1.27
-7.32
5.84
3.02
8.88
-3.62
1.59
4.31
7.63
4.61
Sterling
4.26
0.00
-2.32
-1.72
-11.39
-5.97
-4.54
-4.67
-0.23
-10.22
-2.99
0.90
3.64
-0.11
1.43
-2.05
-5.88
-11.65
0.90
-1.79
3.80
-8.12
-3.16
-0.56
2.60
-0.27
Yen
3.33
-0.89
-3.19
-2.60
-12.18
-6.81
-5.39
-5.52
-1.12
-11.02
-3.86
0.00
2.71
-1.00
0.53
-2.93
-6.72
-12.44
0.00
-2.66
2.88
-8.94
-4.02
-1.45
1.69
-1.16
Source: BofA Merrill Lynch Bond Indices
Table 17: Global Money Market Index Returns
Currency
Australian Dollar
British Pound
Canadian Dollar
Danish Krone
Euro
Japanese Yen
New Zealand Dollar
Norw egian Krone
Sw iss Franc
Sw edish Krona
US Dollar
Ticker
LAD0
LBP0
LCD0
LDK0
LEC0
LJY0
LND0
LNK0
LSF0
LSK0
LUS0
O/N Offer
0.21
0.04
0.09
0.00
0.00
0.01
0.30
0.12
0.00
0.02
0.01
Ticker
L1AD
L1BP
L1CD
L1DK
L1EC
L1JY
L1ND
L1NK
L1SF
L1SK
L1US
Constant Maturity
1M Bid
Ticker
0.22
0.03
0.10
0.01
0.01
0.00
0.30
0.12
0.00
0.03
0.01
L3AD
L3BP
L3CD
L3DK
L3EC
L3JY
L3ND
L3NK
L3SF
L3SK
L3US
3M Bid
0.22
0.04
0.10
0.03
0.01
0.01
0.30
0.12
0.00
0.04
0.01
Ticker
L4AD
L4BP
L4CD
L4DK
L4EC
L4JY
L4ND
L4NK
L4SF
L4SK
L4US
Average coupon
1M Bid
Ticker
0.21
0.03
0.10
0.01
0.00
0.00
0.30
0.13
0.00
0.02
0.01
L5AD
L5BP
L5CD
L5DK
L5EC
L5JY
L5ND
L5NK
L5SF
L5SK
L5US
3M Bid
0.22
0.04
0.10
0.02
0.01
0.01
0.29
0.14
0.00
0.05
0.01
Source: BofA Merrill Lynch Bond Indices
21
Bond Indic es
05 Septem ber 2014
Table 18: Global Government Bill Indices
Euro Gov ernment Bills
Belgium
Finland
France
Germany
Ireland
Italy
Netherlands
Slov akia
Spain
US Treasury Bills
Japanese Bills
Source: BofA Merrill Lynch Bond Indices
22
Local Currency Total Return
Ticker
EGB0
G0GB
G0KB
G0FB
G0DB
G0RB
G0IB
G0NB
GSLB
G0EB
G0BA
G0YB
Aug-14
0.02
0.00
0.01
0.01
0.01
0.00
0.05
0.00
0.00
0.01
0.01
0.00
YTD
0.34
0.13
0.00
0.14
0.12
0.00
0.57
0.07
0.00
0.60
0.05
0.03
Bond Indic es
05 Septem ber 2014
Yield curve spreads
Flattening was the key theme amidst the
global yield curve rally. And with
August’s move most z-scores are in the
fairly notable -2 range. At 181bp,
Sweden’s long/short spread carries the
most extreme reading (-2.6 z-score).
Sweden is also notable in that not only
does it have such an extreme z-score for
the full curve, but also for the short,
intermediate and long curve spreads.
Table 19: Intra-Market Yield Curve Spread Analysis
5yr/2yr Spread
31-Aug
31-Jul
10yr/5yr Spread
31-Aug
31-Jul
30yr/10yr Spread
31-Aug
31-Jul
Australia
Canada
Denmark
Germany
Japan
Sw eden
Sw itzerland
UK
US
Australia
Canada
Denmark
Germany
Japan
Sw eden
Sw itzerland
UK
US
Canada
Denmark
Germany
Japan
Sw eden
Sw itzerland
UK
US
Long/Short
Spread*
Australia
Canada
Denmark
Germany
Japan
Sw eden
Sw itzerland
UK
US
35.0
36.9
29.0
23.6
5.9
46.0
15.1
79.3
104.9
44.6
55.4
76.7
73.2
38.3
59.7
39.7
68.3
77.0
48.0
103.1
83.0
112.2
75.2
65.9
59.5
68.8
31-Aug
79.6
147.2
208.8
179.9
156.5
180.9
120.7
207.1
250.7
44.2
45.1
45.7
32.5
5.1
57.4
25.6
92.7
115.0
51.5
63.5
90.9
87.4
42.1
68.3
44.4
74.9
85.7
48.7
98.5
87.6
113.7
82.1
73.2
58.0
68.5
31-Jul
95.8
161.2
235.1
207.6
160.9
207.9
143.2
225.6
269.2
3-Month Historical
Chg High Low Mean Std Dev Cur-Mn Z Score
-9.2 60.0 35.0 47.0
-8.2 55.6 36.9 45.8
-16.7 51.3 27.7 43.8
-8.9 39.9 22.6 30.8
0.8
8.0
3.5
5.9
-11.4 68.4 46.0 56.4
-10.5 25.9 -4.9 11.0
-13.4 105.3 78.3 91.9
-10.1 118.3 104.2 111.3
6.8
5.1
5.0
3.9
1.2
4.7
7.6
5.8
3.7
-12.0
-8.9
-14.9
-7.2
0.0
-10.4
4.1
-12.6
-6.4
-1.8
-1.7
-3.0
-1.9
0.0
-2.2
0.5
-2.2
-1.7
53.3
65.3
91.2
88.9
41.8
67.7
53.4
76.7
89.3
3.7
4.3
6.1
7.9
1.6
3.0
11.5
4.6
7.1
-8.7
-9.9
-14.5
-15.7
-3.5
-8.0
-13.7
-8.4
-12.3
-2.3
-2.3
-2.4
-2.0
-2.2
-2.7
-1.2
-1.8
-1.7
-0.7 51.7 48.0 49.3
4.5 106.0 95.5 101.9
-4.6 93.8 82.4 88.7
-1.5 117.0 106.5 112.9
-6.9 85.7 75.1 81.2
-7.3 77.0 64.9 73.4
1.6 68.2 54.7 61.3
0.3 77.4 68.5 74.1
0.8
2.6
3.2
2.4
2.3
3.6
3.2
2.4
-1.3
1.2
-5.7
-0.7
-6.0
-7.5
-1.8
-5.4
-1.6
0.5
-1.8
-0.3
-2.6
-2.1
-0.6
-2.3
3-Month Historical
Chg High Low Mean Std Dev Cur-Mn Z Score
-6.9 59.2
-8.1 72.1
-14.1 100.3
-14.2 100.8
-3.8 44.9
-8.6 74.0
-4.7 69.5
-6.6 88.3
-8.7 100.7
44.6
55.4
76.7
72.5
38.2
59.7
36.9
68.3
75.4
3-Month Historical
Chg High Low Mean Std Dev Cur-Mn Z Score
3-Month Historical
Chg High Low Mean Std Dev Cur-Mn Z Score
-16.1
-14.0
-26.3
-27.7
-4.4
-27.0
-22.5
-18.5
-18.5
119.2
181.4
255.1
232.3
164.9
224.6
158.9
261.0
294.9
79.6
147.2
206.2
177.7
156.5
180.9
117.0
207.1
249.0
100.3
165.5
237.0
208.5
160.6
205.3
137.8
229.9
274.8
10.4
8.8
12.1
14.4
1.9
9.3
11.2
12.4
12.2
-20.7
-18.3
-28.2
-28.6
-4.1
-24.4
-17.2
-22.8
-24.0
-2.0
-2.1
-2.3
-2.0
-2.1
-2.6
-1.5
-1.8
-2.0
* 10yr/2yr spread is shown for Australia; 30yr/2yr for all other markets
Source: BofA Merrill Lynch Bond Indices
23
Bond Indic es
05 Septem ber 2014
Table 20: Inter-market Yield Curve Spreads versus US
2 Year
31-Aug
31-Jul
Chng
-1.0
3.4
1.7
-1.7
2.9
-5.9
7.7
-12.2
5 Year
31-Aug
31-Jul
126.4
-20.9
-134.1
-142.9
-162.9
-81.6
-159.9
19.1
Chg
-0.1
5.3
-5.0
-0.6
13.7
-7.3
7.3
-15.6
10 Year
31-Aug
31-Jul
92.1
-43.1
-129.0
-141.3
-206.5
-99.1
-201.3
8.3
Chg
1.7
5.9
-10.4
-6.0
18.7
-7.2
11.3
-13.5
30 Year
31-Aug
31-Jul
Chg
Australia
Canada
Denmark
Germany
Japan
Sw eden
Sw itzerland
UK
Australia
Canada
Denmark
Germany
Japan
Sw eden
Sw itzerland
UK
Australia
Canada
Denmark
Germany
Japan
Sw eden
Sw itzerland
UK
Canada
Germany
Japan
Sw iss
UK
196.1
52.4
-63.1
-62.2
-50.1
-30.0
-62.8
29.2
126.2
-15.5
-139.0
-143.5
-149.1
-88.9
-152.6
3.5
93.8
-37.2
-139.4
-147.3
-187.8
-106.2
-189.9
-5.2
-51.1
-133.1
-144.4
-192.9
-14.5
197.1
49.0
-64.7
-60.5
-53.0
-24.1
-70.5
41.4
-59.0
-122.2
-161.3
-196.6
-2.2
Source: BofA Merrill Lynch Bond Indices
24
7.9
-10.9
17.0
3.7
-12.2
220.8
62.0
-42.3
-42.8
-35.0
7.2
-43.1
55.1
Low
185.5
47.0
-72.5
-67.2
-55.0
-31.6
-70.5
26.6
3-Month Historical
Mean StdDev Cur-Mn Z-Score
High
160.7
0.7
-113.6
-124.4
-143.3
-43.3
-142.4
35.8
Low
118.9
-21.1
-141.8
-147.5
-163.6
-89.6
-168.2
-0.1
3-Month Historical
Mean
S.D. Cur-Mn Z-Score
High
121.0
-29.8
-112.2
-122.5
-186.7
-73.1
-183.7
18.3
Low
83.8
-43.1
-139.4
-147.3
-212.6
-106.2
-202.9
-6.3
3-Month Historical
Mean
S.D. Cur-Mn Z-Score
High
Low
3-Month Historical
Mean
S.D. Cur-Mn Z-Score
High
-50.0
-104.4
-143.0
-182.8
7.8
-61.2
-136.3
-177.0
-208.6
-14.6
199.2
53.9
-58.5
-54.4
-46.7
-14.3
-56.0
42.2
134.8
-11.7
-125.9
-134.9
-152.2
-69.1
-156.2
23.0
98.5
-36.0
-124.0
-135.2
-200.0
-90.8
-192.0
10.5
-55.9
-120.6
-161.4
-192.8
-2.2
8.2
4.0
6.1
5.3
4.2
11.5
6.7
7.2
11.0
5.7
6.8
5.6
4.0
12.3
5.6
8.3
8.9
3.1
6.0
6.3
6.5
7.5
4.3
5.6
2.6
7.9
8.8
5.3
6.3
-3.0
-1.4
-4.6
-7.8
-3.4
-15.7
-6.8
-13.1
-8.6
-3.8
-13.1
-8.6
3.1
-19.7
3.6
-19.4
-4.7
-1.2
-15.3
-12.1
12.2
-15.4
2.1
-15.7
4.8
-12.4
17.0
-0.1
-12.3
-0.4
-0.4
-0.8
-1.5
-0.8
-1.4
-1.0
-1.8
-0.8
-0.7
-1.9
-1.5
0.8
-1.6
0.6
-2.3
-0.5
-0.4
-2.6
-1.9
1.9
-2.1
0.5
-2.8
1.9
-1.6
1.9
0.0
-2.0
Bond Indic es
05 Septem ber 2014
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25
Bond Indic es
05 Septem ber 2014
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Bond Indic es
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