Asia Fixed Income: 2014 Pan Asia Report Card

As the global yields remain low, many yield-hungry investors have turned to Asia for yield pickup and portfolio diversification. Exhibit 1 lists the yield-to-worst of the ten local currency bond markets tracked by the S&P Pan Asia Bond Index.

Exhibit 1: The Yield-to-Worst of the Pan Asian Bond Indices

Source: S&P Dow Jones Indices. Data as of December 31, 2014. Charts are provided for illustrative purposes.

Source: S&P Dow Jones Indices. Data as of December 31, 2014. Charts are provided for illustrative purposes.

Reflecting the strong demand and continuous development, the size of the Asian local currency bond markets, measured by the S&P Pan Asia Bond Index, expanded by more than 9% to USD 6.94 trillion in 2014. And noticeably, the market value tracked by the S&P China Bond Index rose 16% to RMB 26 trillion, fueled by the strong issuance in the corporate market.

In terms of the index performance, despite the losses seen in December, the S&P Pan Asia Bond Index delivered a total return of 6.7% in 2014. The index’s yield-to-worst has tightened from 89bps to 4.34% in the same period.

Among the ten countries, the top three outperformers are China, India and Indonesia, which all recorded double-digit growth, please see Exhibit 2. China, in particular, continued to receive strong demand from global investors regarding the RQFII opportunities, please visit here for my last post on China – What’s More than Yields?. The total return of the S&P China Bond Index gained 10.3% YTD while its yield-to-worst tightened by 128bps to 4.29%.

Exhibit 2: Total Return Performance in 2014

Source: S&P Dow Jones Indices. Data as of December 31, 2014. Charts are provided for illustrative purposes.

Source: S&P Dow Jones Indices. Data as of December 31, 2014. Charts are provided for illustrative purposes.

*All data are as of December 31, 2014.

The posts on this blog are opinions, not advice. Please read our disclaimers.

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