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iBoxx USD Asia Ex-Japan Monthly Commentary: April 2022

iBoxx EUR Monthly Commentary: April 2022

iBoxx ALBI Monthly Commentary: April 2022

iBoxx SGD Monthly Commentary: April 2022

iBoxx GBP Monthly Commentary: April 2022

iBoxx USD Asia Ex-Japan Monthly Commentary: April 2022

April 2022 Commentary

Headline inflation remained hot in April.  The ongoing conflict in Ukraine maintained upward pressure on energy and commodity prices around the world.  The pandemic lockdown in China exacerbated the supply chain bottlenecks, further boosting inflation in many economies.  In the U.S., domestic consumption accelerated at an annualized rate of 2.7% in Q1 2022.  In response, major central banks shifted to a more hawkish stance in their monetary policies to combat inflation.

Rising U.S. rates were a primary driver for Asian USD bond weakness this year.  The iBoxx USD Asia ex-Japan Index retreated 2.2% in April, marking its fourth consecutive monthly decline in 2022.

Asian credit spreads contracted this month, but the rise in interest rates offset gains from the spread tightening.  The USD Asia IG index sank 2.49% with large losses seen in long maturity buckets, while its average credit spread narrowed by 9 bps.  The USD Asia HY index fell 0.91% as its spread shrank by 80 bps.  The CCC-rated segment plunged 7.56%, dragged down by defaults of Sri Lanka government bonds and Chinese real estate issuance.

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iBoxx EUR Monthly Commentary: April 2022

April 2022 Commentary

In line with other markets globally, the yields of iBoxx EUR Overall Index rose by about 50 bps across the whole curve in April.  By the end of April, the average yield of the iBoxx EUR Corporates Index had risen to a level last seen in 2014.  The rise in yields also led to a corresponding shortening of duration—the duration of the iBoxx EUR Eurozone Index dipped below eight years for the first time since 2018.

The upward shift in the yield curve led the iBoxx EUR Overall Index to another month of heavy declines.  Losses extended across all maturity bands; long-dated bonds with a maturity of more than 10 years were hit especially hard, showing declines of more than 7% on average.

The longer average duration of sovereign debt saw the iBoxx EUR Eurozone Index down 3.79% month-over-month, compared with a loss of 2.79% for the iBoxx EUR Corporates Index. 

Losses were observed across all rating categories and corporate sectors.  This is in a contrast to equity indices, where Energy stocks showed positive performance in April.  On the bond side, Utilities and Oil & Gas, the iBoxx sectors with the largest exposure to Energy were in the bottom half in terms of performance in April.

In other market news, European Central Bank’s President Christine Lagarde said in late April that the bank’s bond buying program would slow down toward early third quarter, with the eurozone interest rates also slowing down likely toward July. 

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iBoxx ALBI Monthly Commentary: April 2022

Contributor Image
Kangwei Yang

Director, Fixed Income Product Management

S&P Dow Jones Indices

April 2022 Commentary

As the Omicron wave of COVID-19 subsided in most parts of the world, border restrictions were either relaxed or removed in a number of countries, and businesses and individuals began to look forward to lives that may somewhat resemble pre-COVID-19 days.  This said, global markets did not have the best month in April due to a slew of reasons—including the ongoing Russia-Ukraine conflict, global supply chain disruptions, tightening COVID-19 restrictions in China and inflationary pressures.

Global equities were down 8.15% (as per the EMIX All World Index).  U.S. Treasuries fared slightly better but still ended the month down 3.23%.  In Asian fixed income, the iBoxx Asian Local Bond Index

(ALBI) (unhedged in USD) was also in the red, losing 3.92%, as all eligible markets except China Onshore (up 0.29%) lost ground.  The worst-performing markets were Thailand (‑3.86%) and Malaysia (‑3.05%).  Apart from China Onshore and the Philippines, all other markets recorded losses (in local currency terms) across the yield curve.  The largest losses were concentrated in the long end.  Of these, Thailand 10+ (-7.12%) and Hong Kong 10+ (-6.97%) were notable.  On the bright side, China Onshore saw modest gains across all maturity bands.

Through April, the overall index yield increased by 26 bps to 3.99%.  Excluding China Onshore (‑1 bp), all other underlying markets saw yield increases, with Hong Kong climbing 56 bps to 3.51%—exceeding 3.5% for the first time since index inception.  India remained the highest-yielding bond market in the index, offering 7.19%, while Singapore (2.79%) was the lowest-yielding market.

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iBoxx SGD Monthly Commentary: April 2022

April 2022 Performance

Shorter- and longer-term interest rates in developed markets moved higher in April.  The broad increase in rates reflected a progressing inflationary environment stemming from hot headline inflation, the impact of the pandemic and the ongoing Russia-Ukraine conflict.  Global equities declined and fixed income underperformed, as the abrupt lift-off in rates prompted markets to adjust to new valuations. The U.S. dollar surged to a recent high on the back of aggressive U.S. rate hike forecasts, and commodity prices remained at elevated levels supported by supply dislocations.

In Singapore, the MAS raised the core inflation forecast for 2022 and adopted a tighter monetary policy to slow inflation momentum and maintain price stability.  The iBoxx Singapore Dollar (SGD) Overall Index fell 0.76% in April, after the worst monthly loss of -3.03% since inception over the preceding month.

All investment grade (IG) subindices fell in the red, with the A sector registering the best performance and the BBB sector the worst.  In general, SGD IG bonds endured losses across the curve and faced sharp declines in longer-dated maturity buckets.

With lower duration and higher yield, the non-sovereigns sub-index outperformed both the overall index and government subindex.  Temasek and LTA bonds had the longest duration among the worst performers.

By the end of the month, the overall index offered a yield of 2.83% with a duration of 6.93 years.

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iBoxx GBP Monthly Commentary: April 2022

April 2022 Commentary

As was widely expected, the Bank of England increased its base interest rate during its monetary policy meeting on May 5, 2022, increasing it to the highest level since early 2009.  Stagflation fears remain the key focus in the pound-denominated debt market and are continuing to put pressure on prices.

Amid hiking yields and lower prices, the iBoxx GBP Overall Index was down 2.79% in April.  Government debt, down 2.83%, fared worse than the 2.71% monthly drop in the non-Gilts category.  As such, annual yields on Gilts surpassed their multi-year highs set in 2014.  Yields on corporate debt lagged, but kept those new highs in sight.

In the iBoxx GBP Corporates Index, some categories posted losses in the double digits, including Consumer Services, Health Care, Telecommunications and Utilities.

Within corporates, the Oil & Gas category has become the worst performer this year.  This is mainly due the Russian bonds, which were excluded from all indices at zero value in March.  Outside Oil & Gas, Utilities has been the second-worst performer in the index, down 10.79% down over the past 12 months, on a rolling basis.

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