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iBoxx Asian Local Currency Indices Monthly Commentary: August 2023

iBoxx USD Asia Ex-Japan Monthly Commentary: August 2023

S&P Target Date Scorecard: Year-End 2022

iBoxx USD Asia Ex-Japan Monthly Commentary: July 2023

iBoxx Asian Local Currency Indices Monthly Commentary: July 2023

Commentary - Sep 08, 2023

iBoxx Asian Local Currency Indices Monthly Commentary: August 2023

Kangwei Yang

Director, Fixed Income Product Management

S&P Dow Jones Indices

Monthly performance, maturity, yield and duration of the iBoxx ALBI, iBoxx ABF and iBoxx SGD Indices.

A slew of measures was introduced in China as authorities seek to prop up investor sentiments to support its economy. These included lowering the one-year loan price rate by 10 bps to 3.45%, cutting the stamp duty on stock trading by half, and potentially lowering interest rates on existing mortgages to make payments more affordable to rekindle demand for the crisis-hit property sector.

These measures, which took place in the second half of August, saw China Onshore equities—represented by the S&P China 500 (in USD)—recouped some of their earlier losses but still ended the month losing 8.54%. At the same time, Chinese Onshore bonds—represented by the iBoxx ALBI China Onshore (unhedged in USD)—while up 0.54% in local currency, lost 1.43% in USD terms due to FX losses against the U.S. dollar.

Globally, all eyes were also on the Jackson Hole Economic Symposium, as analysts weighed in on the hawkish tone of the Federal Reserve Chair. Against the higher-for-longer backdrop, U.S. Treasuries—represented by the iBoxx $ Treasuries—lost 0.60% in August. U.S. equities—represented by the S&P 500^®—retreated by 1.77%.

iBoxx Asian Local Currency Indices: Monthly Commentary: Exhibit 1

This month, Asian local currency bonds—as represented by the iBoxx Asian Local Bond Index (ALBI) (unhedged in USD)—retreated 1.98%, largely due to FX losses against the U.S. dollar. Local market performance was a mixed bag.

Among the best-performing markets in local currency terms, Hong Kong and the Philippines posted gains of 0.76% and 0.64%, respectively. Singapore (-1.05%) and Thailand (-0.66%) were the biggest losers in August.

Investors generally preferred shorter-duration exposures in local currency bonds last month. In local currency terms, markets such as China Onshore, China Offshore, Hong Kong, India and the Philippines also saw gains across the yield curve. In the 10+ maturity segment, performance was more mixed. On the one hand, China Onshore 10+ gained 1.91%, while Singapore 10+ fell 3.49%.

As of the end of August, the overall index yield increased by 7 bps to 4.05%. India remained the highest-yielding bond market in the index, posting 7.27%, while China Onshore (up 2.68%) represented the lowest-yielding market.

Commentary - Sep 06, 2023

iBoxx USD Asia Ex-Japan Monthly Commentary: August 2023

Jessica Tan

Principal, Fixed Income Indices

S&P Dow Jones Indices

August 2023 Commentary

The month of August began with an announcement from Fitch Ratings that it would downgrade its U.S. rating from AAA to AA+, which was attributed to fiscal deterioration. U.S. Treasuries, as represented by the iBoxx $ Treasuries, fell 0.60% in August. Given that backdrop and the U.S. Federal Reserve reiterating its commitment to possible further interest rate increases to bring inflation down to its 2% target, the S&P 500^®’s five-month positive run finally gave way to a decline of 1.77%, marking August as its first monthly loss since February 2023. This brought the YTD return of the iBoxx $ Treasuries to 0.86% and the S&P 500 to 17.40%.

In contrast to U.S. inflation concerns, falling consumer prices and other weakening economic indicators in China point to a deflationary environment in the country. On top of that, China’s Real Estate investors were dealt another blow as China’s largest private real estate developer, Country Garden, missed interest payments on two of its U.S. dollar bonds and appealed for an extension on its onshore private bond repayment. In an effort to stimulate the economy and property market, the People’s Bank of China eased policy rates by 10 bps for the second time in three months, relaxed mortgage requirements and lowered borrowing rates for homebuyers.

iBoxx USD Asia Ex-Japan Monthly Commentary: Exhibit 1

The overall index retreated 1.05% in August, weighed down by the high yield segment, which dropped 2.84%. Except for the higher quality bonds with shorter time to maturity, almost all other rating and maturity segments were in the red this month. The worst-performing segment was BB 7-10 Years, which is primarily made up of Country Garden bonds.

iBoxx USD Asia Ex-Japan Monthly Commentary: Exhibit 2

Other than South Korea (up 0.19%), all other markets that comprise the top seven in the index posted negative returns in August. Hong Kong (down 2.42%), Indonesia (down 1.59%) and the Philippines (down 1.24%) were the worst-performing markets. Spreads across all top seven markets widened—except for South Korea—while duration across all top seven markets shortened.

Commentary - Aug 08, 2023

S&P Target Date Scorecard: Year-End 2022

Summary

The S&P Target Date^® Scorecard provides performance comparisons and analytics covering the U.S. target date fund (TDF) universe.
The S&P Target Date Index Series is a consensus-driven, multi-asset benchmark for TDFs. It is designed to be an accurate representation of TDFs in the U.S. market and to be the basis against which managers can assess their performance.
The series is constructed from indices that represent the actual allocations of funds in the U.S. target date space.
The assets used in the construction of the index series are all investable, and the weights are published in advance of the index series’ rebalancing.
S&P Dow Jones Indices also produces S&P Target Date Style Indices. The “To” style indices aim to reduce the impact of market drawdowns around the expected retirement date, while the “Through” style indices aim to mitigate longevity risk—the risk of outliving one’s assets in retirement.
The series consists of 13 S&P Target Date Indices, 11 S&P Target Date “To” Indices and 12 S&P Target Date “Through” Indices. New index vintages are launched in five-year intervals.

Performance Analysis

2022 was a distressing year for U.S. equity and fixed income markets. To combat persistent inflation, the Federal Reserve rose interest rates seven times between March and December 2022, for a cumulative hike of 400 bps.
Large-cap U.S. equities fared the worst compared to their mid- and small-cap peers, with the S&P 500^® posting -18.11% over the year, in comparison to the -13.06% and ‑16.10% of the S&P MidCap 400^® and S&P SmallCap 600^®, respectively.
International equities suffered the same fate, with the S&P Developed Ex-U.S. BMI and the S&P Emerging BMI returning -16.51% and -18.07%, respectively.
As the Federal Reserve continued to raise rates throughout the year, yields on U.S. fixed income increased as well. The S&P U.S. Aggregate Bond Index declined 12.03%, the S&P U.S Treasury Inflation Protected Security (TIPS) Index declined 10.50% and the S&P 500 High Yield Corporate Bond Index declined 11.71%.
The only asset class in the S&P Target Date Index Series that was able to generate a positive returns was the S&P U.S. Treasury Bond 0-1 Year Index, as U.S. Treasury bills became a viable asset class for many investors for the first time in several years. The index gained 0.52%.
REITs, as represented by the Dow Jones U.S. Select REIT Index, had the worst performance compared to any asset in the S&P Target Date Index Series, at -25.96%.
Unsurprisingly, far-dated vintages of the S&P Target Date Index Series fared worse than near-dated vintages, due to higher weights to equity and lower weights to fixed income. Although both asset classes performed poorly in 2022, fixed income's relatively better performance mitigated some of the equity losses that dragged far-dated vintages down.
Near-dated index vintages experienced lower volatility than their far-dated counterparts, with the retirement income vintage experiencing less than half of the volatility of the 2065+ vintage. However, on a one-year basis, risk-adjusted returns were more favorable for far-dated vintages due to relatively higher performance for each unit of risk incurred.

Commentary - Aug 04, 2023

iBoxx USD Asia Ex-Japan Monthly Commentary: July 2023

Jessica Tan

Principal, Fixed Income Indices

S&P Dow Jones Indices

July 2023 Commentary

Following a pause in June, global central banks continued to watch inflation trends and tread carefully on their policy rate decisions. In July, the European Central Bank (ECB) and the U.S. Federal Reserve (Fed) both hiked interest rates by 25 bps, despite slowing inflation.

In Asia, most central banks including China held rates steady in July. Among the few central banks in Asia that made policy moves in July, the Hong Kong Monetary Authority (HKMA) remained committed to its U.S. dollar peg and raised rates by 25 bps in lockstep with the Fed, while the Central Bank of Sri Lanka (CBSL) continued its march in the opposite direction, slashing rates by another 200 bps, following a 250 bps reduction in June.

With signs of inflation losing steam and central banks trying to steer a path toward soft landings for their economies, the S&P 500^® finished the month up 3.11—a run of four consecutive months of gains despite the ongoing rate hikes. Conversely, U.S. Treasuries, as represented by the iBoxx $ Treasuries, retreated by 0.41%. This brought the YTD return of the two indices to 19.52% and 1.47%, respectively.

iBoxx USD Asia Ex-Japan Monthly Commentary: Exhibit 1

As a continuation of the previous month’s trend, the overall index edged up 0.23% in July, mainly driven by a 0.44% gain in the investment grade segment. Most of the gains were contributed by the shorter-end maturity buckets. BBB rated bonds were the only segment with positive returns across all maturity buckets. Year-over-year, the high yield segment posted 8.15%, even as China Real Estate extended its decline from a year ago and posted -5.31%. China Real Estate has played an increasingly smaller role in the performance of the high yield segment, as its weight in the high yield segment shrunk from 46% to 10% over the three-year horizon.

iBoxx USD Asia Ex-Japan Monthly Commentary: Exhibit 2

Other than Mainland China (down 0.24%), all other markets that make up the top seven in the index posted positive returns in July. The Philippines (up 0.85%), Indonesia (up 0.70%) and India (up 0.40%) were the best-performing markets.

Commentary - Aug 04, 2023

iBoxx Asian Local Currency Indices Monthly Commentary: July 2023

Kangwei Yang

Director, Fixed Income Product Management

S&P Dow Jones Indices

Monthly performance, maturity, yield and duration of the iBoxx ALBI, iBoxx ABF and iBoxx SGD Indices.

In late July, the Bank of Japan announced a tweak in its yield curve control framework, potentially allowing the 10-year bond yield to exceed the prevailing cap of 0.5%, a surprising move according to most market analysts. On July 28, the day of the announcement, Japanese Government Bonds, as represented by iBoxx Global Government Japan, fell 0.72% and ended the month down 1.64%.

U.S. Treasuries, as represented by the iBoxx $ Treasuries, also lost ground in July, returning -0.41% as the Federal Reserve raised rates to bring the federal funds rate to a range of 5.25% to 5.5%, a 22-year high. As of today, there is still no consensus on whether we have reached the end of the rate hike cycle.

The jury is still out on the likelihood of a U.S. recession, as the U.S. reported strong employment data and robust corporate earnings. Against that backdrop, the S&P 500^® continued its resurgence with a return of 3.11% in July and 19.52% YTD.

It was largely similar in Asian equities, as the S&P Pan Asia ex-Japan LargeMidCap (USD) posted a 5.35% return in July. This was supported by a good month in Chinese onshore equities, with the S&P China 500 (USD) returning 6.65%.

iBoxx Asian Local Currency Indices: Monthly Commentary: Exhibit 1

Asian local currency bonds, as represented by the iBoxx Asian Local Bond Index (ALBI) (unhedged in USD), were up 2.03% this month. The return was a combination of decent local currency market performances as well as FX gains against the U.S. dollar. Year-to-date, the index has returned 3.30%.

Among the underlying markets, in local currency terms, only Hong Kong (-0.26%) and the Philippines (-0.15%) posted losses. The best-performing markets were Indonesia (0.64%) and China Onshore (0.48%).

The largest gains and losses were concentrated in the 10+ segment. China Offshore 10+ and Indonesia 10+ had the highest gains, at 1.65% and 1.19% respectively. On the other side, the Philippines 10+ (down 3.94%) and Hong Kong 10+ (down 1.42%) extended their losses and were the bottom two segments for the second consecutive month.

As of the end of July, the overall index yield remained relatively unchanged at 3.98%. India remained the highest-yielding bond market in the index, offering 7.27%, while China Onshore (2.73%) represented the lowest-yielding market.

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