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iBoxx GBP Monthly Commentary

10 May 2022 Paulina Lichwa-Garcia

As was widely expected, the Bank of England increased its base interest rate during its monetary policy meetingon May 5, 2022, increasing it to the highest level since early 2009. Stagflation fears remain the key focus in the pound-denominated debt market and are continuing to put pressure on prices.

Amid hiking yields and lower prices, the iBoxx GBP Overall Index was down 2.79% in April. Government debt, down 2.83%, fared worse than the 2.71% monthly drop in the non-Gilts category. As such, annual yields on Gilts surpassed their multi-year highs set in 2014. Yields on corporate debt lagged, but kept those new highs in sight.

In the iBoxx GBP Corporates Index, some categories posted losses in the double digits, including Consumer Services, Health Care, Telecommunications and Utilities.

Exhibit 1: Monthly Perfomance - April 2022

Within corporates, the Oil & Gas category has become the worst performer this year. This is mainly due the Russian bonds, which were excluded from all indices at zero value in March. Outside Oil & Gas, Utilities has been the second-worst performer in the index, down 10.79% down over the past 12 months, on a rolling basis.

2022 Month-End Rebalance

The iBoxx GBP Overall Index saw net insertions of more than GBP 8.52 billion as of the latest rebalance. Bank-issued bonds dominated the additions 22 new bonds were added, while 7even departed the index. There were no rating changes in this rebalance.

Exhibit 2: iBoxx GBP Net Changes in Index Weights by Sector

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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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