Monthly performance, maturity, yield and duration of the iBoxx ALBI, iBoxx ABF and iBoxx SGD Indices.
The banking sector dominated headlines over the past few weeks after the dramatic collapse of Credit Suisse and two regional U.S. banks: Silicon Valley Bank and Signature Bank. Fear of the issues becoming more widespread caused some volatility in the markets, but market analysts suggested the events were idiosyncratic rather than systemic.
Some investors in Singapore would also have felt the heat in the write-down of Credit Suisse Contingent Convertible (CoCo) bonds, which included an SGD 750 million bond issued in June 2019 with a 5.63% coupon. On a positive note, the Monetary Authority of Singapore (MAS) reaffirmed the financial hierarchy of payout for distressed banks, such that equity shareholders would continue to absorb losses ahead of additional tier 1 and tier 2 bond holders.
Against the backdrop of bank stress, the U.S. Federal Reserve raised interest rates by a conservative 25 bps in the latest move to quash inflation with “more dovish tones” according to some observers.
At the end of an extraordinary month, the S&P 500® inched up by 3.51%. U.S. Treasuries—represented by the iBoxx $ Treasuries—were also in the black, up 3.1%. Despite woes in some major banks, confidence in the sector remained seemingly strong among investors, as both the iBoxx $ Financials (up 1.47%) and iBoxx $ Banks (up 1.52%) managed to post positive returns in March.
It was a good month for all local markets in the iBoxx Asian Local Bond Index (ALBI). The overall index (unhedged in USD) was up 3.21% in March; capital gains and appreciation of most local currencies against the U.S. dollar contributed to the positive performance.
In local currency terms, South Korea (up 3.06%), Hong Kong (up 2.88%) and Singapore (up 2.86%) led the gains. China off- and onshore bonds were among the poorest performers, returning 0.50% and 0.61%, respectively, but both markets still managed gains in a decent month for fixed income, despite woes in banking-related additional tier 1 (AT1) bonds.
The largest gains were concentrated at the long end of the curve, with Hong Kong 10+ (up 6.58%), Singapore 10+ (up 5.32%) and South Korea 10+ (up 4.70%) leading the pack. Besides the top-performing segments, it was also a sea of green across maturity buckets for all eligible markets.
As of the end of March, the overall index yield declined 22 bps to 3.95%, while yields for all local markets declined. India remained the highest-yielding bond market in the index, offering 7.45%, while Thailand (2.97%) remained the lowest-yielding market.
