Asian bonds have remained relatively resilient to date, with the JP Morgan Asian Credit Index down less than 1% year to date. Part of this resilience, according to Rong Ren Goh, head of macro and thematics, comes from Asia’s “improving long-term macro fundamentals”.

In emerging Asia, fiscal discipline has been steadier, and inflation better contained, he noted. “Policy credibility remains largely intact, and real yields are positive for the right reasons. External balances are also healthier, and domestic savings in the region continue to rise,” Goh (pictured) said.

Moreover, during the Middle East conflict, current account surpluses in many Asian economies can provide some cushion to absorb higher energy costs.

History also shows that Asian US dollar bonds have been more resilient during periods of market stress. This was seen during the 2022 global rates and credit sell-off, when aggressive global monetary tightening drove deep and simultaneous losses across many traditional defensive assets.

In the current Iran war, Asian investment grade bonds have also outperformed US and European IG bondsmonth to date, noted Goh.

“We have also seen correlations between Asian credit and global bond markets decline during periods of heightened stress. This differentiated behaviour can help cushion portfolios during global risk-off episodes.”