November 2023 Commentary
Amid signs of slowing inflation globally in November, global central banks mostly held rates unchanged due to concerns that inflation might rebound if they were to loosen their rein on rates, while trying to avoid denting growth. In Asia, the weakening U.S. dollar and falling oil prices helped ease inflation and allowed most Asian central banks to adopt the same wait-and-see cautious approach and maintain existing rates.
The U.S. Treasury department indicated that it would slow the pace of increasing longer-dated debt issuances and add lower-than-expected supply into the U.S. Treasuries market. This caused the long end of the U.S. Treasuries yield curve, as represented by the iBoxx $ Treasures 10Y+, to decline from 5.28% to 4.71% within the month. The 10Y+ index recouped some of its losses by the end of the month, gaining 8.66% and bringing its YTD level to -4.38%. The S&P 500® rallied in tandem with the 10Y+ index, gaining 8.92% after three consecutive months of losses.
Following a series of interest rate cuts and cash injections into the economy in recent months, the People’s Bank of China (PBOC) pledged continued support for the domestic economy through accommodative monetary policy. To fend off potential financial risks from debt-laden property sectors and local governments, the PBOC asked banks to keep financing channels open to the property sector and work with local governments to resolve debt risks.
November was the best month for the overall index this year, as the index gained 3.41%, with the investment grade and high yield segments rising by 3.25% and 4.59%, respectively. In terms of rolling one-year returns, the China LGFV segment performed the best, at 7.32%.
Along with U.S. Treasuries, all segments of the market rallied this month, with the long-end maturity buckets performing best. Both the investment grade 10Y+ and high yield 10Y+ segments surged by more than 10%.
All of the top seven markets by market value in the index posted positive returns in November. The two worst-performing markets from last month rallied the most and rose to the top of the ranking this month: Indonesia (up 5.77%) and the Philippines (up 4.89). Spreads across five of the seven markets narrowed by at least 20 bps—except for Singapore and South Korea—and duration lengthened or was unchanged across all markets.
