Monthly performance, maturity, yield and duration of the iBoxx ALBI, iBoxx ABF and iBoxx SGD Indices.
Markets were off to a buoyant start in 2023, as the S&P 500® rallied 6.18% for the month, one of its strongest January returns in recent years. This was accompanied by a “less hawkish” tone from the U.S. Federal Reserve as inflation numbers eased. After the meeting on Jan. 31-Feb. 1, 2023, the Federal Open Market Committee (FOMC) announced a more conservative interest rate rise of 25 bps.
As investors continued to speculate on the likelihood of a recession in the U.S., Europe and the U.K. this year, there was more agreement among market participants that numerous significant rate hikes may be a thing of the past (at least for now). As interest rates begin to stabilize, U.S. Treasuries—as represented by the iBoxx $ Treasuries—gained 2.81%, offering a yield of 3.75% at the end of January.
In Asia, markets were also optimistic that China’s reopening will spur market activities, which would especially benefit tourism-reliant economies that depend heavily on Chinese travelers. With the potential easing of shipping routes and resumption of supply chain normalcy, global trade may benefit from the reopening of the world’s second-largest economy.
General optimism was observed in Asian bond markets, as the iBoxx Asian Local Bond Index (ALBI) (unhedged in USD) was up 4.51% in January. The gain was attributed to capital gains (except from China Onshore and India) and currency appreciation against the U.S. dollar (except for Hong Kong).
