Asian bonds have staged a credible comeback. But can their momentum continue?
While we were still in a period of shock and awe during the March/April period, the latter parts of Q2 were better described as a period of healing and adjustment. Significant rate cuts from the developed market (DM) and emerging market (EM) central banks illustrate the global scale of the economic challenges created by Covid-19.
A favourable risk-return profile, potential extra yield and diversification are some of the key reasons supporting the investment case for Asian local currency fixed income.
Asian debt markets have been hurt by the COVID-19 pandemic, however there are potential opportunities out there. China, for example, has actually seen corporate defaults fall because of proactive government measures. Overall, SSGA expect yields to trend lower. Here’s why.
The spread of COVID-19 has placed extraordinary pressure on the markets. The stronger fundamentals, market structures and dynamics of Asian economies and bond markets are some of the main factors underpinning the relative resilience of Asian local currency bonds.
While the full impact of the virus remains unclear, it will likely force China to maintain a degree of policy support into the second half of 2020 and possibly beyond.