Gary: FTSE also brings along a fixed strong fixed income credentials anchored by the flagship benchmarks such as the World Government Bond Index or what we call the WGBI, which is a widely tracked by global investors. Against the evolving global macro backdrop, SGX identified a gap in Asian rates risk management solutions and we initiated discussions with FTSE. Given FTSE's strong branding and existing index governance framework, the collaboration emerged as a natural fit.
Paul: Welcome to Index ideas from FTSE Russell. I'm Paul Amery, your podcast host. In this podcast we look into how FTSE Russell Indices are built and why. We explore index ideas that can help you address real world investment challenges.
Paul: As a reminder to listeners, you can't invest in an index. And so the concepts that we explore in the podcast are not investment advice. Any reference to potential investment strategies is intended for informational and educational purposes only.
Paul: In this episode of the Index Ideas podcast, we look at a new index covering local currency, government bond markets in some of the fastest growing economies of the Asia Pacific region.
Paul: The FTSE Asia Pacific Liquid Government Bond Index series was launched at the end of March 2026. It underlies new dollar-based futures contracts on the Singapore Exchange (or SGX). The SGX FTSE Asia Pacific government bond futures started trading on April the 20th and are available in three-year, five-year and ten-year tenors.
Paul: To discuss this new index range and its use cases, I'm joined by Robin Marshall, director of fixed income research at FTSE Russell and by Gary Tan, FX and rates derivatives manager at SGX. Robin and Gary, welcome to the podcast.
Robin: Thank you
Gary: Thank you Paul
Paul: Robin, let me start with you. What is the FTSE Asia Pacific Liquid Government Bond Index series?
Robin: These are indexes that we devised that started at the end of March, Paul, which cover five regional economies India, Indonesia, Malaysia, Philippines and Thailand. And they cover three separate tenors if you like, in the bond market, three years, five years and ten years. And they are individual indexes for the country. So there are 15 if you like 15 separate indexes. And they also have they map closely to the SGX futures contracts. So they underpin, if you like, the SGX futures contracts, they are standardised indexes, highly liquid chosen because of the liquidity and accessibility for investors, both local and internationally. And they don't include China quite deliberately because this also meets demand from investors for emerging market Asia exposure ex China without having a very heavy China weight. These are individual contracts for those five different countries which enable management of interest rate and duration exposure for investors.
Paul: Thank you for explaining that. And Robin, why did we choose those five regional markets for inclusion in the index series?
Robin: Well those are highly liquid accessible markets, Paul, which are also in the Asia Pacific Government bond index. So they'd already met the criteria for that FTSE index. But in addition to that, they have high liquidity. Some of the bonds are, if that's the starting universe, the bonds that were in the Asia Pacific Government Bond Index. These are a fine tuning, a filtering, if you like of those bonds down to very liquid benchmarks for the three tenors, three-, five- and ten-year for the five countries.
Paul: Gary, why did you decide to work with FTSE Russell on this joint project?
Gary: Well, SGX has partnered with FTSE Russell across several equity index products. Our flagship futures include the FTSE China A50 and FTSE Taiwan, as well as other contracts such as the FTSE, China H50 and the FTSE Vietnam. Through this established partnership, SGX and FTSE Russell maintain regular engagement, ongoing dialogue on new product development opportunities. Besides, FTSE also brings along a fixed strong fixed income credentials anchored by the flagship benchmarks Schmucks such as the World Government Bond Index or what we call the WGBI, which is a widely tracked by global investors. Against the evolving global macro backdrop, SGX identified a gap in Asian rates risk management solutions and we initiated discussions with FTSE. Given FTSE's strong branding and existing index governance framework. The collaboration emerged as a natural fit.
Paul: Thank you Gary. And how do these new futures contracts add to the products available for investors wishing to manage Asia Pacific interest rate exposure?
Gary: Well, access to APAC interest rate risk management isn't something new, although it's primarily done through cash bonds, IRSs, Non-deliverable IRS, as well as bond total return swaps, or what we call the TRS. While these instruments are widely used, participation is typically limited to institutions with sufficient counterparty credit limits or prime brokerage access. As a result, the broader set of participants remain constrained, unable to effectively hedge exposures or express directional views on Asian rates. The SGX bond futures addresses this gap by referencing FTSE's bond indices, enabling efficient hedging across specific countries and tenors in a standardised, accessible format. More importantly, these products are complementary rather than being a substitute. The cash, markets will continue to underpin asset ownership. The IRS markets will continue to enable bespoke risk management, while the futures will complement the ecosystem, delivering liquidity, simplicity and transparency.
Paul: Gary, what activity have you seen in the futures contracts since their launch in April?
Gary: Activity since launch have been very encouraging. As with new products on the exchange, we are building awareness and we continue to be engaged with the marketplace. We have seen very positive responses with our participants putting in a number of trades to ensure their systems capture the risk and reporting accurately on feedback so far from both the real money and the macro community has been very positive.
Paul: Robin, if you could pick out a few key trends in the five markets you mentioned India, Indonesia, Malaysia, Philippines, and Thailand in those government bond markets during the last few years. What would they be?
Robin: Well, I think overall it's worth saying, Paul, that APAC, if you like, is a region escaped the 22/23 inflation shock to some extent more so than Europe and North America. So interest rates didn't have to go up as much for inflation control in those five economies. Philippines, to some extent, the exception rates went up about 400 basis points there during 22/23. But generally, the scale of the interest rate increases in the other economies was about half that. It was only a couple of hundred basis points, which was way less than, say, the US Fed that put up rates 500 basis points. So as a result, interest rates never went up as far because there wasn't a huge inflation shock. On the other hand, they didn't come down as far in, if you like, in 24/25. I mean, in India, for example, rates have only come down relatively modestly from the peak. And generally, I think it's worth saying that the central banks in the region have been cautious about cutting rates quickly. They still wish to consolidate their inflation credibility. They have inflation targets, which they've been very keen to ensure are met.
Robin: The economies with greater energy, net energy exposure, notably the Philippines have seen rates actually increase since the conflagration in the Middle East at the end of February. So there is a bit of upward pressure on some rates. In India too, where growth has been strong the rate declines have stopped, but by and large, without the net, I mean the net energy exposure is the divider, if you like. And you have a little bit of a high-yield, low-yield split. Thailand, particularly has some of the lowest rates driven also by quite a strong exchange rate. Philippines, India with stronger growth in Indonesia, higher rates. So a little bit of a split if you like. And, clearly, some diversity there for investors, if they wish to either look at the basis spread between the different markets, how they want to manage their duration, exposure. So, a range of important issues, which the indexes and the futures contracts allow investors to confront with that greater granularity that this index series provides, as opposed to a regionally blended aggregate index.
Paul: Thank you Robin. Gary, why did you decide to settle the futures in US dollars rather than, for example, in local currencies?
Gary: That's a very good question. Our focus is to improve accessibility to interest rate risk management. So through market consultations prior to launch, we have observed that many end users actually prefer a clean dollar-denominated product. This allows them to isolate and manage rates exposure independently from FX risk. Well, in practice, participants looking to express views on markets such as India or Indonesia are primarily focused on bond yield and price movements. The FX exposure is typically managed separately in the currency market. In the traditional setup, investors need to firstly have a local custodian account, obtain the local currency, purchase bonds, and then hedge the associated FX risk. With SGX new dollar-settled bond futures, they can achieve the same rates exposure more efficiently without embedding or managing currency risk within the instrument itself.
Paul: Robin, where can listeners go on the FTSE Russell website to find out more about this index series?
Robin: Well, if they simply tap in the FTSE Asia Pacific liquid government bond series there is an overview page which will also give them access to a more disaggregated breakdown of exact index construction and indeed the rebalancing because there's a six monthly rebalancing of these indices as bonds mature or indeed become less liquid. Those are the two drivers of the rebalance, which happens every six months. But that's a good starting page.
Paul: Thank you. And Robin and Gary, any concluding thoughts on this index series launch? Robin, let me start with you.
Robin: Yeah. I think in a way, the index launch is another example of smarter index series, if you like the development, particularly in the emerging market space, in this case of more granular indices, which allow investors to express views about different markets and not view, if you like, emerging market Asia as one kind of one big aggregate. They're able instead to express different views, do synthetic overlays, if you like to manage their interest rate and duration risk across, across the region. And indeed trade the different performance of the different markets. So this is an important development, I think in that process of smarter indices, which give more dimensionality, if you like, to investors in how they cope with different market movements and the divergence in inflation and growth performance in the region.
Paul: Gary, any concluding thoughts on the new index launch and the product you've launched on the SGX?
Gary: Well we're very thankful. I think these are very exciting times. This is an innovative product and we continue to have positive market feedback as we work on market adoption. We are thankful again for the many partners besides FTSE who have made this possible.
Paul: Robin Marshall and Gary Tan, thank you both for joining me.
Gary: Well thank you, Paul.
Robin: Thank you.
Paul: That's it for this episode of Index Ideas. If you've enjoyed the conversation, then please follow us and give us a rating or review on your podcast app of choice. If you'd like to get in touch with the show, you can do so via the email address
[email protected]. But for now, from me, Paul Amery. Goodbye.
