Featuring iBoxx USD Asia-Pacific
March 2025 Commentary
The transition from globalization to deglobalization accelerated in March when the U.S. intensified its tariff measures by imposing a 25% tariff on automotive imports. With the anticipated “reciprocal” tariffs that President Donald Trump is expected to announce in early April, more nations are setting aside their differences and reviving discussions on free trade agreements to safeguard their economies against the impacts of these forthcoming tariffs. In the Asia-Pacific region, central banks maintained their benchmark interest rates as many of their economies rely significantly on exports to the U.S. and would be vulnerable to the impact of the “reciprocal” tariffs.
Most Asian currencies strengthened against the U.S. dollar in March, which helped them to end Q1 stronger in comparison. Amid a backdrop of global uncertainty and a diminishing interest rate gap with the U.S., the Japanese yen, often viewed as a safe-haven currency, experienced the largest gain, rising 4.60% in the first quarter.
10-year U.S. Treasury yields—as represented by the iBoxx USD Treasuries Current 10-Year—remained steady at 4.26% (down 1 bp in March, down 37 bps YTD). The index was up 0.19% and 3.72% for the month and quarter, respectively. The S&P 500® declined 5.75% for the month, erasing early gains from this year and bringing its Q1 return to -4.59%.
Chinese equities—as represented by the S&P China 500 (USD)—inched up 0.90% in March, bringing their Q1 gain to 6.68%. Meanwhile, Chinese-issued U.S. dollar bonds—as represented by the iBoxx USD Asia ex-Japan China—returned 0.37% and 2.49% in March and Q1 2025, respectively.
The Asian U.S. dollar bond market concluded the month up 0.09%, with a 0.37% return from high yield bonds and a 0.04% return from investment grade bonds. In terms of the one-year return, high yield bonds continued to lead in performance (up 10.16%) among the three broad categories, followed by the overall market (up 6.38%) and the investment grade segment (up 5.80%).
China Real Estate sustained its momentum from the previous month and rose another 1.28% in March. It also stood out as one of the best-performing segments in the past one-year period, up 23.20%. The APAC ex-China U.S. dollar bond market underperformed the Asian ex-Japan U.S. dollar bond market by 5 bps in March and by 48 bps for the past one-year period.
Short to medium maturity bonds continued their uptrend and delivered positive performance in March, while long-dated bonds with maturities of 10 years or more (which were the top performers in February) saw the most significant decline in March, similar to U.S. dollar Treasuries.
