iBoxx ALBI Monthly Update: April 2022
March 2022 End-of-Month Commentary
The ongoing Russia-Ukraine conflict continues to disrupt the Covid-19 related supply-chain backlog and rally commodity prices (which have further amplified inflationary pressures). Central banks globally, including the US Federal Reserve, are moving towards more hawkish stances. After the FOMC meeting in mid-March, the Fed funds target rate was raised, and more rate hikes this year are expected.
As a result, US treasuries (represented by the iBoxx $ Treasuries index) lost 3.04% in March as investors flocked towards riskier assets such as global equities (as per the EMIX All World Index) which gained 1.71%. As a result, US treasuries (represented by the iBoxx $ Treasuries index) lost 3.04% in March as investors flocked towards riskier assets such as global equities (as per the EMIX All World Index) which gained 1.71%.
In Asian fixed income, the iBoxx Asian Local Bond Index (unhedged in USD) - where government bonds represent close to 80% of the index - lost 1.83%. All eligible markets except China Onshore fell into the red. The worst performing markets were Singapore (-3.39%) and Hong Kong (-2.41%).
Most eligible markets recorded losses (in local currency terms) across the yield curve, including Hong Kong, Singapore, South Korea and Thailand. The largest losses were concentrated in the long-end, notably Singapore 10+ (-6.60%) and Hong Kong 10+ (-4.97%). Short and medium-dated Indian government bonds were the best performers this month.
Through March, the overall index yield increased by 25 bps to 3.73%. Except for South Korea which remained flat, all other underlying markets saw yield increases. The yield of Hong Kong and Singapore increased by 56 bps and 47 bps, respectively. At month-end, India remains the highest yielding bond market in the index offering 6.92%, while Singapore (2.66%) remains the lowest yielding market1.
April 2022 Rebalance
The latest rebalance saw 44 bonds entering and 27 bonds leaving the overall index. Please refer to the Appendix in the full report for a detailed breakdown of insertions and deletions.
A weight change on the eligible markets will be reviewed and applied annually, and the next change is expected on 30 November 2022. The latest weights are updated in the full report.
The index duration lengthened by 0.07 to 6.68 years after the recent rebalance. All markets except China Offshore (-0.02 years) and Hong Kong (-0.01 years) saw their duration increase this month, with the largest increase coming from Malaysia (+0.18 years). Among eligible markets2, South Korea currently has the longest duration (8.80 years) while China Offshore remains the least sensitive market to interest rates with a duration of 2.88 years.
1Taiwan is not mentioned as it has 0% weight in the index.
2Taiwan is not mentioned as it has 0% weight in the index.
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This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.
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