Featuring iBoxx USD Asia-Pacific
November 2024 Commentary
Shortly after Trump’s presidential election win in the U.S, the Federal Reserve reaffirmed its view from September that the job market was easing and inflation was moving toward the 2% target. It delivered a 25 bps interest rate cut on Nov. 7, with several nations that peg their currencies to the U.S. dollar following suit. In Europe, central banks in the U.K. and Sweden implemented rate cuts. In the Asia-Pacific region, the Reserve Bank of New Zealand lowered its policy rate by 50 bps, while central banks in South Korea and Hong Kong cut their rates by 25 bps.
The U.S. dollar strengthened against most Asian currencies for a second consecutive month; however, one exception was the Japanese yen. Among Asian currencies, the Malaysian ringgit performed best against the U.S. dollar, gaining 3.34% since the start of the year.
10-year U.S. Treasury yields—as represented by the iBoxx USD Treasuries Current 10-Year—declined by 11 bps to 4.22%. The index was up 1.18%, bringing its YTD return to 1.07%. The S&P 500® broke past the 6,000 mark and achieved the biggest monthly gain this year of 5.73%, bringing its YTD return to 26.47%.
Chinese equities—as represented by the S&P China 500 (USD)—continued their weakening trend, declining by another 3.13%, lowering the YTD return to 11.97%. The loss came despite the People’s Bank of China (PBoC) injecting USD 111 billion of liquidity into the banking system through outright reverse repos and buying a net USD 28 billion of sovereign bonds from dealers in November. Unlike Chinese equities, Chinese-issued U.S. dollar bonds— as represented by the iBoxx USD Asia ex-Japan China—were in the black this month, climbing 0.51% and bringing the YTD return to 7.03%.
The Asian U.S. dollar bond market ended the month up 0.46%, weighed down by a 0.44% drop in high yield bonds, while the investment grade segment posted a 0.60% gain. China Real Estate, which has been one of the best-performing segments since March, lost steam this month and declined by 1.12%. For the one-year period, the China Real Estate segment remained up 28.39%. The APAC ex-China U.S. dollar bond market underperformed the Asian (ex-Japan) U.S. dollar bond market by 13 bps in November.
The ultrashort 0-1 maturity segments and short-end investment grade segments saw slight gains, while the long-end investment grade segments gained the most. Investment grade segments were favored in November, outperforming high yield by 104 bps. The yields of high yield bonds rebounded to 9.13% after falling below 9% last month. Sovereign bonds, which make up approximately 16% of the overall index, also underperformed non-sovereign bonds by 210 bps in November. High yield bonds were up 13.86% YTD, while investment grade bonds trailed, though they still posted a positive return of 4.93%.
