Monthly performance, maturity, yield and duration of the iBoxx ALBI, iBoxx ABF and iBoxx SGD Indices.
All eyes are on the upcoming U.S. elections on Nov. 5, 2024, as market analysts continue to predict the outcome and its potential impact on the trajectory of the U.S. dollar, fiscal policies and the broader financial markets.
As we await the outcome, numerous Asian central banks have been busy reacting to the larger-than-expected rate cut (50 bps) by the U.S. Federal Reserve in September. Key markets in the iBoxx ABF and iBoxx ALBI—namely Thailand, Korea and the Philippines—responded with a 25 bps reduction in October to stimulate growth in their respective economies. The People’s Bank of China, as part of its stimulus package to spur its economy, also lowered its one-year and five-year loan prime rate (LPR) by 25 bps. Other major economies, including the Eurozone (down 25 bps), Canada (down 50 bps) and New Zealand (down 50 bps) also adjusted their policy rates in October.
Against that backdrop, U.S. Treasuries—as represented by the iBoxx $ Treasuries—pulled back 2.47% in October. Likewise, U.S. corporate investment grade bonds—as represented by iBoxx $ Corporates—retreated 2.24%. The upward run of the S&P 500® was also halted, as the key benchmark dropped 0.99% in October following a sell-off in the Information Technology sector toward the end of the month. As of the end of October, the S&P 500 returned 19.62% YTD. For Chinese stocks, the stimulus effect somewhat faded, as the S&P China 500 (USD) pulled back 4.70% in October. Nevertheless, the benchmark was still in positive territory YTD, up 15.59% as of the end of October 2024.
iBoxx Asian Local Bond Index (ALBI)
Momentum was halted in Asian local currency bonds as well, as the Asian Local Bond Index (ALBI), representing Asian local currency bonds, pulled back 3.53% in October in USD unhedged terms. This was largely due to the U.S. dollar’s appreciation against all Asian currencies represented in the index, with the Malaysian ringgit and the Korean won losing 6.20% and 5.24%, respectively, this month.
Local bond markets, measured in local currencies, predominantly fell, with the exception of Thailand, which rose by 0.70%, and China Onshore (up 0.17%). Indonesia, Hong Kong and Singapore were the poorest-performing markets, losing 1.33%, 1.11%, and 0.78%, respectively.
Throughout the yield curve, minor gains were noted in the 1-3 year segment of some markets, while the majority of the 10+ year segments experienced more significant losses, except for Thailand, which recorded gains across all maturity sleeves. Hong Kong’s 10+ year segment stood out, albeit for the wrong reason, recording the highest loss of any market maturity segment in October (down 3.54%).
As of the end of October, the overall index yield increased by 10 bps to 3.70%. India continued its position as the highest-yielding bond market, posting 6.91% (Indonesia was close behind at 6.90%), while China Onshore (2.12%) remained the lowest-yielding market.
