June 5, 2023

Fixed Income Insights (China) - June 2023

Monthly report

Chinese spreads fall as very low inflation gives scope for more easing

Chinese sovereign spreads narrowed, reflecting inflation differentials, and US downgrade fears after the debt ceiling crisis. The Swap Connect programme may increase foreign participation by facilitating onshore rate risk hedging. China IG credits is in a sweet spot, though HY credits remain depressed by property woes.

Key highlights:

  • Macroeconomic backdrop − Lower energy prices drive disinflation, but wide dispersion of inflation persists
  • Chinese bonds − Onshore bond yields fell further in May, yield curve steepened with a sharper drop in short yields
  • Chinese and Asian bonds − Asian government spreads tightened further in May, as Treasury yields rose
  • Performance − Indonesian and Indian governments remained strongest performers, Bunds underperformed

This report provides actionable insights on currency-adjusted performance, macro drivers, shifts in yields, spreads and curves across conventional government and corporate bonds, for both renminbi and dollar-denominated issues.

For specialist content on a range of investment topics, including macroeconomic analysis and how it affects market performance, and multi-asset analysis, viewed through our indices and data, explore our Global Investment Research hub.

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