Corporate credits return to gains as Asian equities surge

Foreign investors flooding into region's bond markets to escape Treasuries volatility 

Corporate credits return to gains as Asian equities surge

(ATF) Returns on Chinese bonds climbed Tuesday, sending a key gauge of corporate and local government debt higher.

Corporate securities joined the advance after a steep selloff Monday sparked by a coupon payment.

The benchmark ATF China Bond 50 Index of AAA rated credits climbed 0.02% to 106.80. It’s lost 0.11% in the past two weeks amid a global selloff as fears of a return to inflation hung over the world’s economies.

Also on ATF

The Corporates sub-index also advanced 0.02%, Enterprises and Local Governments were little changed, and Financials climbed 0.03%.

Bonds climbed in tandem with Asian equities as hopes that the recovery from the Covid-pandemic downturn would accelerate with the approval of a $1.9 trillion relief package in the US. 

Asian bonds have benefited from volatility on US Treasury markets, sending investors to the relative stability of the world’s second-largest fixed-income market.

Foreign investors have bought a net $41.5 billion of Chinese bonds since the start of the year, already about a third of what they did in all of 2020. Inflows into other emerging Asia bond markets this year are $2.8bvn, or 61% of last year's total.

"Emerging markets Asia is attractive from a relative value perspective," said JC Sambor, head of emerging markets fixed income at BNP Paribas Asset Management in London.

"We think there is more value in high yield. We think it is fundamentally mispriced," he said, referring to the cheapness of bonds in markets such as China.

  • Additional reporting by Reuters


China Bonds China Bonds