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iBoxx GBP Index Monthly Commentary

03 March 2022 Paulina Lichwa-Garcia

February month-end rebalance of the iBoxx GBP Index, was dominated by a departure of one UK's government gilt. A total of GBP 37.25 billion of notional departed the index last month, majority of which came from a GBP 33.83 billion single of a UK note with about a year to maturity.

Nine bonds were deleted from the index, and 12 added, with a total notional of GBP 7.95 billion. One bond was impacted by a rating change, with Meadowhall Finance PLC seeing its rating nudged down from AA to BBB.

The iBoxx GBP index has two bonds with Russia as the country of risk, both in the corporate space, including bonds by Gazprom and Russian Railways. The two of them stayed in the index in this rebalance, in accordance with the present state of sanctions. The full communication by iBoxx on the ongoing crisis can be accessed here.

Financial markets became gripped with the Russia-Ukraine war end of February, which also reverberated in the sterling debt market.

Last month the iBoxx GBP index extended monthly negative returns, albeit at a slower rate than seen in January. The corporates category led the declines last month, as opposed to gilts in January. The dismal performance of the Oil&Gas sector was led by Gazprom, which saw its bond plunge more than 60% month-on-month. The BBB-rated note with April 2024 maturity also weighed on the returns of other BBB-rated maturities. For the overall iBoxx GBP index shorter duration and higher quality bonds performed better month-on-month. Gilts in the 3-5 maturity bucket even turned a positive return, and all the gains came in the last trading day.

But February started with a different focus for the GBP market, as Bank of England hiked the base rate after UK's inflation surged in January to 5.5%, the highest since March 1992. Further increases are expected this year, but the rapidly evolving Ukraine crisis is putting a spinner into this process. Now the trajectory and the peak level for UK's inflation are becoming more elusive it remains to be seen how quickly central banks - not only BoE - will continue to tighten their policies.

See full report here.


IHS Markit provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.


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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