August 2022 End-of-Month Commentary
The recent rally in U.S. equities hit a reset after hawkish
comments by the Federal Reserve Chairman Jerome Powell at the
Jackson Hole Economic Symposium.
In his speech to investors, Powell indicated that the Fed is
committed to raising rates to quell inflation and to bring demand
and supply dynamics in better balance. His remarks sparked a
sell-off in U.S. stocks and pushed bond yields and the U.S. dollar
For the month of August, the 2-year U.S. Treasury yields rose
from 2.90% to 3.45%, while the 10-year U.S. Treasury yields were up
48 bps to 3.15%. Meanwhile, the U.S. dollar came close to a 20-year
high against other major currencies.
With U.S. yields rising across the curve in August, the rally of
Asian USD bonds in July was short-lived. This month, the iBoxx USD
Asia ex-Japan Index fell 0.40%, largely driven by the negative
performance of its investment-grade bonds. The overall index yield
rose 24 bps to 5.82%, and the overall index spread narrowed 26 bps
to 244 bps.
Making up about 85% of the overall index by market value, the
investment grade (IG) subindex considerably underperformed the high
yield (HY) subindex this month. In the IG segment, losses were seen
in the mid-to long-end of the curve. In contrast, the HY subindex
generally logged gains across the maturity buckets. Moreover, the
HY subindex yield and spread dropped by 75 bps and 137 bps,
Among the seven largest markets in the index, only Mainland
China (up 0.17%) returned a gain, while Singapore (-1.43%), South
Korea (-1.30%) and Hong Kong (-1.15%) were the worst
September 2022 Rebalance
This rebalance, the iBoxx USD Asia ex-Japan Index added 11
eligible bonds, bringing in about USD 5.1 billion of new
The IG subindex saw about USD 4.8 billion of notional, raised
from 10 new issues, while the HY subindex received USD 300 million
worth of notional from one issue.
Of the 36 bonds removed from the index this month:
− 14 traded flat, including 13 bonds from two issuers in the
China real estate sector; and
− Five were either redeemed, partially repurchased or
Seventeen fallen angels from two issuers were captured this
month. All bonds from these issuers have BB ratings in the
Please refer to the Appendix in the full commentary for a
breakdown of this month’s insertions and deletions, and a list of
fallen angels and rising stars recognized in 2022.
Post-rebalance, the overall index duration fell to 4.15 years.
Markets with the most noticeable change in duration were Pakistan
(-0.09 years), Indonesia (-0.08 years), Malaysia (-0.08 years), the
Philippines (-0.05 years) and Thailand (-0.05 years).
Posted 12 September 2022 by Wilson Mak, Analyst – Indices, S&P Dow Jones Indices
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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.