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Asian Fixed Income: Navigating a more hawkish central bank environment 

20 July 2026

Murray Collis, Head of Asia Fixed Income

Chris Lam, Portfolio Manager, Asia Fixed Income

Eric Lo, Portfolio Manager, Asia Fixed Income

Billy Wu, Portfolio Manager, Asia Fixed Income

Amid a complex geopolitical backdrop, Asian fixed income posted resilient performance in the first half of 2026. As inflation pressures have remained elevated, global central banks have pivoted to a more hawkish stance, including some in Asia. In this Mid-Year Outlook, the Asian Fixed Income team explains this important change in monetary policy expectations, and why the asset class is well positioned to capitalise on it.

Summary:

  • Asian central banks have become incrementally more hawkish on the back of sustained inflationary pressures, with some hiking rates.
  • With this change in interest rate dynamics, the need for selectivity has further increased. Asia Fixed Income continues to offer a range of opportunities that are value-added for investors’ portfolios.
  • Asian high-yield (HY) and investment grade (IG) hard currency bonds are attractive offering higher relative yields and shorter duration than global peers.
  • Of the two, we prefer Asia HY in the second half of 2026, as the universe continues to provide the highest yield (a forward-looking metric) across all major global fixed income asset classes, offering a notable spread pick-up, while maintaining stable-to-improving credit metrics.
  • In Asian IG, the asset class is expected to remain supported by favourable macro dynamics across Asia backed by healthy growth and accommodative policy.
  • In local markets, Japan and India provide attractive investment opportunities.

 

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