iBoxx GBP Index Monthly Commentary: April 2022

March month-end rebalance of the iBoxx GBP Index saw net additions of only about GBP 570 million, amid a small number of both insertions and deletions. Two Russian bonds were dropped out of the index, following the exclusion of all bonds with the country of risk of either Russia or Belarus. The excluded bonds were issued by Gazprom and Russian Railways.

Nine bonds entered the index, and six deleted.

Index duration slipped month-on-month. The duration between the first trading day in April and March was down 0.02 to 10.87.

As expected, Bank of England increased its base rate to pre-Covid level in March, at the same time warning that the conflict in Ukraine could push inflation later in the year above 8%. February reading for the UK's consumer price index surprised to the upside, hitting 6.2%, making it the highest level in three decades.

With high inflation, pound denominated debt remains under pressure. Monthly returns for GBP indices were again negative across, with declines again slowing down month-on-month.

Gilts, especially on the longer end of the curve, led the declines. In non-gilts category, corporates were a mixed bag of performance. Oil & Gas sector again fared the worst, on the back of Gazprom. But Base Materials, Health Care and Telecommunicates declines were much slower, with longer maturities even seeing positive monthly returns.

The spread between government debt and corporate bonds - as measured by the Annual Benchmark Spread - declined, having peaked to the highest level since June 2020 in February.

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