iBoxx ALBI Monthly Commentary: November 2022

November 2022 Commentary

Protests against the “Zero-COVID” policy in China dominated the headlines in November, causing global stocks to fall in a knee-jerk reaction in the last week of the month.  Despite some jitters caused by the protests, the S&P 500^® posted a gain of 5.38% in November, as the market banked on the possibility of a more accommodative stance from the Federal Reserve.  One of the key economic indicators—the 2s/10s spread of the U.S. Treasury yield curve—continued to widen into the red and has remained in negative territory since July of this year.  This was against the backdrop of somewhat easing inflation numbers and a slightly more dovish tone in the Federal Reserve Chair’s latest speech in late November.

U.S. Treasuries—as represented by the iBoxx $ Treasuries—gained 2.83% in the penultimate month of this year.  In Asian fixed income, the iBoxx Asian Local Bond Index (ALBI) (unhedged in USD) surged 5.47% in the same period as a result of both capital and FX gains (against the U.S. Dollar) in most eligible local markets.

Most local markets recorded gains (in local currency terms) this month, with South Korea (up 3.88%) and Indonesia (up 3.61%) leading the pack.  In fact, half of the eligible markets returned more than 2%.  China Onshore (-0.99%) and China Offshore (-0.12%) were the only markets in the red.

Gains were observed across the yield curve (apart from China On- and Offshore) and the highest gains were concentrated in the long end of the curve.  Returns of the Hong Kong 10+, South Korea 10+ and Thailand 10+ exceeded 5% this month.

From a yield perspective, the overall index yield (in semiannual terms) dipped slightly (-23 bps), offering 4.23% as of Nov. 30, 2022.  Consistent with performance of local markets, only yields of China On-and Offshore rose this month.  India remained the highest-yielding bond market in the index, offering 7.34%, while China Onshore (2.98%) remained the lowest-yielding market.

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