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iBoxx GBP Monthly Commentary

08 June 2022 Paulina Lichwa-Garcia

May 2022 Commentary

The British pound sterling-denominated iBoxx indices extended losses in May but at a slower pace than in previous months. Yields on iBoxx GBP Indices rose across the board, with the duration slipping lower. Over the course of the month, the short maturities halted losses, with some sectors flipping into positive territory.

However, the longer maturities and government-issued bonds remained under pressure. The iBoxx GBP Gilts Index, reflecting government bonds, returned -3.28% last month, with the biggest monthly declines concentrated in the long-dated maturities, amid fears of stagflation in the economy.

Earlier in May, the Bank of England's governor, Andrew Bailey, said the U.K.'s central bank had limited tools at its disposal to limit further inflation hikes, which rose to new highs in the April reading released mid-May.

In the corporate space, Utilities, which tends to include more leveraged companies, saw the lowest monthly returns, at -2.39%. Consumer Services was not far behind, with worries of economic slowdown looming.

May 2022 Month-End Rebalance

The month-end rebalance in May resulted in a small number of insertions and deletions in the iBoxx GBP Overall Index, with only about GBP 4.06 billion of insertions and GBP 1.20 billion of deletions. Four bonds saw a rating upgrade: two issued by AXA SA and two by Volkswagen International Finance NV. The sub-sovereigns category saw the highest number of insertions, with few overall new additions in the Financials, Real Estate and Collateralized categories. All insertions were for issuance below the GBP 1 billion mark.

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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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