Monthly performance, maturity, yield and duration of the iBoxx ALBI, iBoxx ABF and iBoxx SGD Indices.
February saw losses across major equity and fixed income markets, a reversal of the gains made in January. The S&P 500® dropped 2.61% as market participants fret about the possibility of higher interest rates backed by persistent inflation and a strong labor market. At the same time, the 10-2 Year Treasury Yield Spread—a recession indicator—fell -0.89%, its lowest level since the 1980s, sending mixed signals to the market.
Against this backdrop, U.S. Treasuries—represented by the iBoxx $ Treasuries—also gave up most of its January gains and lost 2.44% in February.
In Asia, the re-opening story of China continued to unfold as the National Bureau of Statistics of China reported that its official manufacturing purchasing managers’ index rose to 52.6 in February, (up from 50.1 in January), its highest in more than 10 years. In Hong Kong, it was also recently announced that the mask mandate would end effective March 1, 2023, a move that might attract more visitors and businesses back into Hong Kong.
Similar to the U.S., Asian local currency bond markets—as represented by the iBoxx Asian Local Bond Index (ALBI) (unhedged in USD)—declined 4.33% in February, effectively erasing gains from January. Losses were widespread across numerous markets, and at the same time, the U.S. dollar appreciated against all underlying currencies.
Modest gains were observed (in local currency terms) in China Off- and Onshore, India and Indonesia, with China Offshore leading the pack at 0.44%. At the other end, South Korea (-3.01%) and Hong Kong (-1.88%) posted the biggest losses.
The largest losses were concentrated at the long end of the curve, with both Hong Kong 10+ and South Korea reporting losses of more than 5%. The only market with gains across the yield curve was China Offshore, with its medium-to-long-term bonds leading the gains last month.
At the end of February, the overall index yield increased by 19 bps to 3.98%. Except for China Offshore (down 0.12 bps), yields across all other markets rose with Hong Kong topping the chart (up 60 bps). India remained the highest-yielding bond market in the index, offering 7.45%, while Thailand (2.97%) remained the lowest-yielding market.