Asian bonds

20 August 2026, 21:00 UTC Chief Investment Office GWM Investment Research

Asian bonds CIO View: Asian bonds Adrian Zuercher, Head CIO Global Asset Allocation, UBS AG Hong Kong Branch Chun Lai Wu, Head CIO Asia Asset Allocation, UBS AG Hong Kong Branch Kasey Wang, CFA, Strategist, UBS AG Hong Kong Branch Christy Yuen, Strategist, UBS AG Hong Kong Branch

• Asia credit continues to show resilience, and we believe investors Global Asset Class Preference Attractive can find reassurance in the region’s strong fundamentals and a market structure that is now better positioned to withstand external JACI composite shocks. 17 Aug • Asia investment grade credit offers compelling yields above Dec 26 5%, which amounts to a yield pickup of more than 1ppt above US Jun 27 145.00 Treasuries of comparable maturities. We believe Asia IG remains an Source: JPMorgan, UBS attractive opportunity to deploy cash and lock in stable carry with relatively low interest-rate sensitivity.

• Asia high-yield credit remains one of the best-performing major fixed-income asset classes globally, offering yields above 7%. We expect Asia HY to deliver mid- to high-single-digit returns over the next 12 months and believe it is a compelling addition to investors’ core investment-grade portfolios. Source: UBS

Central scenario • Attractive: Asian credit, Asian investment grade, Asian high yield

• Neutral: Asian local currency bonds, JACI composite spread December 2026 / June 2027 target: Chinese government bonds 145bps/145bps

Asia credit continues to show resilience. Despite concerns over Middle East tensions, US central bank policy, and the sustainability of AI investment, Asia credit spreads have remained stable over the past month. Rates have been a bigger driver of Asia credit volatility, but the asset class’s average 4.5-year duration has helped it weather the selloff in the long-end of the rates curve. Year-to-date, the JACI composite index has returned 1.0% as of 14 August, and we believe investors can find reassurance in the region’s strong fundamentals and a market structure that is now better positioned to withstand external shocks.

Asia investment-grade credit remains Attractive. Year- to- date, the JACI Investment Grade Index has delivered a positive return of 0.3% as of 14 August, despite the US 5-year Treasury yield rising by nearly 50 basis points. Recently, short- to medium-term US Treasury yields have declined alongside easing US inflation, benefiting the JACI IG Index, which has a duration of approximately 4.7 years.

Looking ahead, all-in yields for Asia IG credit remain attractive, with the JACI IG Index yielding 5.3%. Although spreads for Asia IG credit are tight relative to historical averages, we believe current levels are well

This report has been prepared by UBS AG Hong Kong Branch. Please see important disclaimers and disclosures that begin on page 4.

supported by continued improvements in rating migration, a historically low distress ratio and healthy net issuance trends. The average 103-basis- point yield pick-up offered by Asia IG over US Treasuries of comparable maturities is also higher than the 70-basis-point pick-up offered by US IG, as represented by the Bloomberg USD IG Corporate Intermediate Index. In our view, Asia IG provides an attractive opportunity to deploy cash and lock in stable carry with relatively low interest-rate sensitivity, particularly in the five-year- and -shorter segment. We continue to view Asia IG as a core holding within globally diversified and Asia multi-asset portfolios.

Asia high-yield credit remains one of the best-performing major fixed-income asset classes globally. Despite volatility in equities, Asia HY credit continues to outperform global peers, with the JACI Non- Investment Grade Index returning 5.2% year-to-date as of 14 August.

Compared with five years ago, the Asia HY credit market is now well diversified across both geographies and sectors. Bonds are largely issued by financial, consumer and sovereign issuers, and no single market accounts for more than 20% of the JACI Non-Investment Grade Index.

Asia HY credit offers an average all-in yield of 7.4% and is supported by healthy rating migration and a low…