IN THIS LIST

U.S. Equities Market Attributes June 2022

ETF Transactions by U.S. Insurers in Q1 2022

iBoxx EUR Monthly Commentary: May 2022

iBoxx GBP Monthly Commentary: May 2022

iBoxx USD Asia Ex-Japan Monthly Commentary: May 2022

U.S. Equities Market Attributes June 2022

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Howard Silverblatt

Senior Index Analyst, Product Management

Key Highlights

Market Snapshot

Enter the bear, exit the bull.  We decidedly entered a bear market this month, as higher inflation, higher interest rates and a slowing economy pushed the S&P 500 into official bear territory (down 20% from its last closing high, in this case Jan. 3, 2022’s 4,796.56).  It reached a closing low of -23.55% (3,666.77, on June 16), then seesawed upward, as buyers went bargain hunting, but with slower trading than when sellers dominated the market.  The S&P 500 closed the month at 3785.38, down 8.39%, and it closed at -16.45% for Q2 (the worst Q2 since 1970’s -18.87%) and -20.58% YTD (the worst start to a year since 1970’s -21.01% ).  Last Fourth of July, investors were opening their half-year statements with a 14.41% gain; now it’s a 20.58% decline.

At this point, inflation is being placed squarely as the fall guy for the market declines, as the market’s “expert” historians cite the Fed’s “excess” stimulus programs as the reason for the 40-year high inflation rate, and then the Fed’s attempts to Volker its way out of inflation and avoid a recession, with the market still split on if they can avoid one (but more seeing it than not).

As for the current downturn (which is broad), it should be noted where it came from.  The S&P 500 posted a closing high pre-COVID-19 on Feb. 19, 2020 (3,386.15), and it quickly declined 33.93% by March 23, 2020 (closing at 2,237.40), reacting to the pandemic.  It also quickly rebounded from that low to set a new closing high on Aug. 18, 2020 (3,389.78), 181 days later, and it set another 90 new closing highs until this year’s Jan. 3, 2022, closing high (4,796.56).  During that time period, earnings (operating and as reported), sales, cash-flow, buybacks and dividends all set new records. 

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ETF Transactions by U.S. Insurers in Q1 2022

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Raghu Ramachandran

Head of Insurance Asset Channel

Introduction

In the first quarter of 2022, insurance companies traded USD 19.5 billion in ETFs; this is roughly in line with the amount traded in the first quarter for 2020 and 2021.  However, insurers only added USD 0.2 billion in ETFs to their general accounts, which was much lower than the past two years.  Insurers continued the trend from 2021 of selling Equity ETFs and buying Fixed Income ETFs.

ETF Trades

In the first quarter of 2022, insurance companies traded USD 19.5 billion in ETFs.  This is down from USD 24.6 billion in the first quarter of 2020 but higher than USD 15.2 billion in Q1 2021 (see Exhibit 1).

As we have seen before, companies traded more at the end of the quarter.  Indeed, companies traded more in March than in January and February combined (see Exhibit 2).

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iBoxx EUR Monthly Commentary: May 2022

May 2022 Commentary

Sovereign debt led the EUR-denominated debt losses in May, with inflation amid the energy crisis being heightened by the ongoing war in Ukraine.

Month-to-date returns on European debt were in negative territory across all the eurozone countries (see Exhibit 2).  Debt issued by the Baltic states and Greece has seen the strongest declines not only over May, but over the past 12 months.  In the iBoxx € Corporates Index, Real Estate and Utilities had the worst returns last month.

The yield on the iBoxx € Overall Index, which incorporates both sovereign and corporate debt, rose about 25 bps, while duration fell by 0.13 to 6.98.  Yields on corporate debt saw higher increases than those for sovereigns.

Annual yield on the iBoxx € Corporates Index rose by 30 bps to 2.69%, with duration slipping only 0.06. Expectations that the European Central Bank will taper its bond buying starting in the third quarter have been pushing yields higher, as this would withdraw an important buyer from this market.


iBoxx GBP Monthly Commentary: May 2022

May 2022 Commentary

The British pound sterling-denominated iBoxx indices extended losses in May but at a slower pace than in previous months. Yields on iBoxx GBP Indices rose across the board, with the duration slipping lower. Over the course of the month, the short maturities halted losses, with some sectors flipping into positive territory.

However, the longer maturities and government-issued bonds remained under pressure. The iBoxx GBP Gilts Index, reflecting government bonds, returned -3.28% last month, with the biggest monthly declines concentrated in the long-dated maturities, amid fears of stagflation in the economy.

Earlier in May, the Bank of England’s governor, Andrew Bailey, said the U.K.’s central bank had limited tools at its disposal to limit further inflation hikes, which rose to new highs in the April reading released mid-May.

In the corporate space, Utilities, which tends to include more leveraged companies, saw the lowest monthly returns, at -2.39%. Consumer Services was not far behind, with worries of economic slowdown looming.


iBoxx USD Asia Ex-Japan Monthly Commentary: May 2022

May 2022 Commentary

The month of May featured plenty of extreme swings in financial markets.  With inflation uncomfortably high, several central banks announced increases in benchmark rates this month.  The widespread regime shift in rate policies pressured valuations across asset classes, which had ballooned for the past decade from record low-interest rates.  The 10-year U.S. Treasury yield topped 3.1% in May, the highest since 2018, before ending the month at 2.74%.  Rallies were short-lived, as uncertainty in rate policies coupled with recession fear clouded the markets.

Asian USD bonds continued to face downward pressure this month.  The iBoxx USD Asia ex-Japan Index fell 0.15% in May, marking its fifth consecutive monthly decline this year.  The index showed signs of stabilizing from the rising U.S. interest rates, as the drop in performance this month was smaller than in the previous four months.  The index yield (flat at 0.0%) and index credit spread (up 1.8 bps) were little changed at 5.32% and 242 bps, respectively.

This month, the USD Asia IG subindex outperformed its high yield counterpart, returning 0.37% with the spread virtually unchanged.  In contrast, the USD Asia HY subindex sank 2.68% as its spread widened by 57 bps, primarily driven by severe losses in the B- and CCC-rated segments across the curve.


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