iBoxx ALBI, iBoxx ABF and iBoxx SGD
January 2025 Commentary
The first month of 2025 has been eventful, with significant developments across various sectors. The political landscape saw a change in leadership with the inauguration of President Trump on January 20. Meanwhile, the Information Technology sector buzzed with the introduction of DeepSeek's AI assistant. On the economic front, the U.S. Federal Reserve concluded the month by maintaining its interest rate target at 4.25%-4.50%, a decision that will undoubtedly influence market dynamics in the coming months.
Some central banks globally also adjusted their monetary policies in January, with many opting for modest rate cuts of 25 bps. This included the eurozone and, in the Asia Pacific region, Bank Indonesia. In contrast, the Bank of Japan took a different approach, raising its target rate by 25 bps to 0.5%, marking its highest level in 17 years.
As a result, Japanese Government Bond yield—as represented by the iBoxx Global Government Japan—increased by 10 bps in January to 1.62% while posting a -0.74% return. In the U.S., amid the higher-for-longer stance, Treasury yield—as represented by the iBoxx $ Treasuries—remained relatively unchanged, decreasing by -3 bps to 4.68%, while the index returned 0.51% in January.
In U.S. equities, the S&P 500® surpassed the 6,100 mark in late January before pulling back slightly, closing the month up 2.70%. Asian equities, as represented by the S&P Pan Asia Ex-Japan LargeMidCap (USD), inched up 0.87% during the same period, while the S&P China 500 (USD), representing Chinese equities, pulled back 0.95%.
iBoxx Asian Local Bond Index (ALBI)
January 2025 Commentary
Asian local currency bonds—as represented by the iBoxx Asian Local Bond Index (ALBI)—inched up 0.69% in USD unhedged terms in January, outperforming U.S. Treasuries by 72 bps.
Most regions saw positive returns in local currency terms, with South Korea and India leading the way at 1.12% and 0.87%, respectively. However, Singapore and Thailand experienced slight declines, with losses of 0.13% and 0.08%, respectively. In terms of FX movements against the U.S. dollar, results were mixed; overall, currency movements contributed positively to the index gains of 0.69%, adding 0.21%.
The longer end of the yield curve had more pronounced and generally positive returns across various markets. South Korea's 10+ year segment saw the most significant increase, rising 1.64%, followed closely by China's onshore 10+ year segment with a 1.58% gain. Conversely, Singapore's 7-10 year and 10+ year segments experienced the most notable declines, falling 0.59% and 0.63%, respectively.
