Monthly performance, maturity, yield and duration of the iBoxx ALBI, iBoxx ABF and iBoxx SGD Indices.
As the Israel-Hamas conflict broke out in early October, investors swooped to the safe haven of U.S. Treasuries, as marked by a 22-bps decline in the yield of iBoxx $ Treasuries between Oct. 6, 2023, and Oct.10, 2023. That was short lived, as the sell-off of long-dated U.S. Treasuries in recent weeks pushed the yield of the index back above 5%, ending the month at 5.15% and a month-to-date loss of 1.35%. This also brought the 10-2 Year Treasury Yield Spread to its highest level in the past year, widening to -0.19% by month-end. The lowest point recorded in the past year was -1.08% in July.
This month, the European Central Bank also put a pause to 10 consecutive rate hikes and decided to hold interest rates following signs of easing inflation and slowing economic activities. This was decided after the ECB Governing Council’s monetary policy meeting in late October. In Asia, Indonesia’s and the Philippines’ central banks raised rates by 25 bps in October in a bid to manage inflationary pressures.
On the equities front, the S&P 500® posted -2.20%, its third consecutive month of negative returns. Likewise, the S&P Pan Asia Ex-Japan LargeMidCap (USD) was down 3.34%, and China—as represented by S&P China 500 (USD)—also lost ground in October (-3.53%).
Asian local currency bonds—as represented by the iBoxx Asian Local Bond Index (ALBI) (USD)—posted a loss for the third consecutive month, declining 1.05% in October. Capital losses were observed in all underlying markets; in addition, most local currencies (except Hong Kong dollar and Thai baht) lost ground against the U.S. dollar.
Three markets, in local currency terms, posted positive performance after adding returns from the bond coupon payments and accrued interest, namely Singapore (up 0.22%), Hong Kong (up 0.19%) and China Onshore (up 0.10%). The worst-performing markets were Indonesia (down 1.99%), the Philippines (down 1.60%) and South Korea (down 1.51%).
Similar to U.S. Treasuries, the longer-dated bonds experienced a sell-off this month with the largest losses in the 10+ years segment. The heaviest losses were seen in the Philippines 10+ (down 4.27%) and South Korea 10+ (down 3.05%). China Onshore was the only market with gains across the yield curve, in local currency terms.
As of the end of October, the overall index yield increased by 11 bps to 4.34%. India remained the highest-yielding bond market in the index, posting 7.48%, while China Onshore (2.80%) represented the lowest-yielding market.
