Asian Fixed Income: China and the Global Bond Market

In a previous piece, we discussed that China’s lackluster performance had made it the worst-performing country in the Pan Asian bond market in 2017, and that it was the only country that closed the year in negative territory. The one-year total return of the S&P China Bond Index fell 0.29% last year (see Exhibit 1), contrasting with the strong gains observed in previous years.

The S&P China Bond Index also underperformed the broad market. The S&P Global Developed Aggregate Ex-Collateralized Bond Index (USD), which seeks to track the performance of investment-grade debt issued by sovereign, quasi-sovereign, foreign government, and corporate entities in developed countries, delivered a total return of 7.64% in 2017.

Specifically for the corporate bond sector, China lagged its U.S. counterpart. The S&P 500® Bond Index is designed to measure the performance of U.S. corporate bonds issued by the constituents of the iconic S&P 500, and it rose 6.05% last year, compared with the 0.58% gain in the S&P China Corporate Bond Index (see Exhibit 2).

In terms of yield performance, the yield-to-worst of the S&P China Bond Index widened 178 bps to 4.78%, as of Dec. 29, 2017. As a comparison, the yield-to-maturity of the S&P Global Developed Aggregate Ex-Collateralized Bond Index (USD) and the S&P 500 Bond Index were 1.41% and 3.28%, respectively.

Despite their performance, China’s solid economic growth, attractive bond yields, and the underparticipation of foreign investors may serve as positive drivers for the Chinese bond market.

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

Leave a Comment

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>