Lily Chung
Jan Thorwith
Nelson Huang
The Asia Pacific region’s local currency government bond markets are large and increasingly integrated into global portfolios. For many investors, however, access and risk management tools remain fragmented across countries, tenors and market structures. Different trading conventions, varying liquidity conditions and operational complexity can make it challenging to express sovereign duration views or to manage exposure efficiently across the region.
FTSE Russell has developed the FTSE Asia Pacific Liquid Government Bond index series in response to these market dynamics. The series is built on a transparent, rules-based framework and focuses on liquid segments of sovereign yield curves across five key Asia Pacific bond markets. The benchmarks also serve as the underlying references for new futures contracts listed on the Singapore Exchange, illustrating how robust index design can support the continued development of the Asia Pacific region’s fixed income market infrastructure.
Standardised sovereign exposure across Asia Pacific
The FTSE Asia Pacific Liquid Government Bond Index Series—covering India, Thailand, Indonesia, Malaysia and the Philippines across three key tenors (three-, five- and ten‑year)—now serves as the underlying benchmark for the new futures contracts. (see Figure 1).
Each contract provides exposure to a clearly defined country/tenor “sector group,” constructed from a small basket of the most recently issued or reopened government bonds. By capturing liquidity across two or three benchmark bonds rather than relying on a single issue, the structure supports more stable exposure.
Figure 1. FTSE Asia Pacific Liquid Government Bond Index Series sector groups
| Remaining term* | ||||
| Country | 3-year tenor | 5-year tenor | 10-year tenor | # of bonds to be selected in each sector group at most |
| India** | 2-4 yars | 4-8 years | 8-11 years | 3 |
| Thailand | 2-4 yars | 4-6 years | 8-11 years | 2 |
| Indonesia | 2-4 yars | 4-7 years | 7-11 years | 3 |
| Malaysia | 2-4 yars | 4-6 years | 8-11 years | 2 |
| Philippines | 2-4 yars | 4-7 years | 8-11 years | 3 |
Source: FTSE Russell. Past performance is not a guide to future returns. Please see the end for important legal disclosures.
The design of the index series targets four core attributes that are critical to fixed income derivatives users:
- Liquidity is prioritised through the selection of only the most recently issued or reopened bonds
- Transparency is embedded in the rules-based methodology, with clear selection rules, equal weighting and scheduled fixing dates making each index easy to understand and replicate
- Tradability is reinforced through semi-annual index rebalancing that is aligned with Singapore Exchange contract cycles (March/September and June/December), facilitating smooth rollover and predictable risk profiles
- Simplicity comes from equal weighting within each sector group and the exclusion of non-conventional bonds to create clean, stable exposures suitable for derivatives
By offering standardised, centrally cleared exposure to defined sovereign curve segments, the new SGX futures provide a streamlined and capital-efficient alternative to managing portfolios of multiple bonds and navigating separate local market rules. The contracts support a wide range of applications, including:
- Risk management and hedging – futures users can hedge interest rate risk, fine-tune duration exposure and adapt to market movements with efficiency
- Allocation and exposure – they can gain exposure to specific yield curve segments with ease and minimal friction
Building on a long-standing partnership
Building on nearly two decades of close collaboration between FTSE Russell and the Singapore Exchange, the introduction of futures on the FTSE Asia Pacific Liquid Government Bond Index Series represents the latest milestone in this long-standing relationship. The partnership has fostered the development of derivatives in single-country and regional Asian equity index futures, including flagship products designed to deepen liquidity and broaden international access to Asian markets.
Together, FTSE Russell and Singapore Exchange are extending the region’s exchange-traded toolkit, enabling more efficient capital allocation, risk transfer and portfolio management across Asia Pacific markets. With a scalable benchmark framework, FTSE Russell’s transparent, rules-based indices provide a robust foundation for continued innovation in derivatives around the world.
Disclaimer
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