Sweet spot for China IG credit and government bonds created by low inflation

Although Chinese spreads widened versus the G7 in March, as G7 yields fell more, Chinese yields also fell, as the PBoC eased reserve requirements, and sought to boost growth. IG credits outperformed HY globally, as investor risk-appetite weakened on US bank woes. Indonesian governments proved best Q1 and 12M performers.

Key highlights:

  • Macroeconomic backdrop − US banking woes reinforce G7 recession risks
  • Chinese bonds − PBoC reserve requirement cut helps government bonds rally, led by longs
  • Chinese and Asian bonds − Asian governments joined the global government bond rally on the flight to quality, HY underperformed
  • Performance − Indonesian and Australian governments were strongest performers in Q1

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.

Fixed Income Insights (China Edition) is part of a series of Market Maps reports, subscribe to our Market Maps reports here.

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