Monthly performance, maturity, yield and duration of the iBoxx ALBI, iBoxx ABF and iBoxx SGD Indices.
As we ended the third quarter of 2023, U.S. interest rates held steady after the latest FOMC meeting in September, though the Fed took a hawkish tone and signaled the possibility of more hikes before the end of the year.
Markets reacted on the news, as U.S. Treasuries—represented by the iBoxx $ Treasuries—ended the month down 2.38%, posting a yield of 4.85%. The last time the index recorded a yield exceeding 4.85% was back in 2007. At the same time, U.S. equities—represented by the S&P 500®—retreated by 4.87%.
In Asia, the Bank of Thailand surprised market analysts by raising its key interest rate by 25 bps, to 2.50%, its highest in 10 years. Concurrently, the end of September marked the start of an eight-day golden week holiday in China, which combines the mid-autumn festival and National Day holidays. Market observers were looking out for increased festive spending to boost the economy. Chinese onshore equities—represented by the S&P China 500 (USD)—posted a second consecutive month of declines, down 2.34% at month’s end; better results are hoped for when work resumes in October. At the same time, Chinese onshore bonds—represented by the iBoxx ALBI China Onshore (USD)—lost 0.60%, to which both capital and FX losses contributed.
For the second month running, Asian local currency bonds—as represented by the iBoxx Asian Local Bond Index (ALBI) (USD)—posted a loss, declining 1.90%. Both Capital and FX losses against the U.S. dollar across most underlying markets contributed to the loss.
In local currency terms, Thailand (-2.56%) and Hong Kong (-1.10%) were the worst-performing markets. Only India and the Philippines managed to post gains in September, returning 0.18% and 0.02%, respectively.
As seen in Exhibit 4, investors generally preferred shorter duration (1-3 year maturity segment) exposures in select markets in September. Having said that, it was largely losses across the yield curve. Heavier declines were mainly in the 10+ year maturity segment, notably Thailand 10+ and Hong Kong 10+, which were down 5.03% and 4.97%, respectively.
As of the end of September, the overall index yield increased by 18 bps to 4.23%. India remained the highest-yielding bond market in the index, posting 7.33%, while China Onshore (2.78%) represented the lowest-yielding market.
