iBoxx ALBI Monthly Commentary: October 2022

October 2022 Commentary

With inflation still trending higher and currencies weakening against the U.S. dollar across Asian economies, most Asian central banks (except China) have continued to tighten their monetary policies over the past two months. After the third consecutive 75 bps rate hike in the federal funds rate in September, the market shifted its attention to the Q3 corporate earnings announcements in October. 

The S&P 500^® reclaimed some of its YTD losses with a positive 7.99% performance in October, after losing nearly 19% YTD.  With robust Q3 earnings, the S&P 500 Energy delivered 24.84% returns in October, bringing its YTD gains to 63.18%.  Conversely, U.S. Treasuries—as represented by iBoxx $ Treasuries—lost 1.56% in October and -14.73% YTD.

After a month of negative returns across all the underlying Asian local markets in September, the iBoxx Asian Local Bond Index (ALBI) (unhedged in USD) slightly outperformed U.S. Treasuries, at -0.90% in October despite a -0.88% FX return.  The YTD performance of the iBoxx ALBI was -14.67% YTD, echoing the U.S. Treasuries performance over the same period.

With the exceptions of Malaysia (-2.22%) and Hong Kong (-1.56%), all underlying Asian local markets posted returns of between 1% and -1% in October.  Continuing its reign as the best-performing market in September, the October’s top performer was China Onshore (up 0.73%) (in domestic currency terms).  At the same time, the U.S. dollar continued to strengthen against most currencies in the index, lowering the iBoxx ALBI’s performance in U.S. dollar terms.  Only Singapore (up 1.38%), the Philippines (up 1.14%) and South Korea (up 0.44%) saw positive FX returns against the U.S. dollar, as the three central banks’ aggressive monetary policy tightening measures helped their currencies hold up against the U.S. dollar in the short term.

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