China Junk Bonds Show More Resilience on Local Investor Support

(Bloomberg) -- China’s high-yield dollar bonds have suffered smaller losses due to volatile Treasury yields, compared with India and Indonesia, thanks to the increasing number of mainland investors seeking to buy the nation’s offshore notes.

Dollar junk bonds from China, which accounts for about 60 percent of Asian speculative-grade bonds, are preferred by Lucror Analytics for their higher risk-adjusted return over peers such as those from Indonesia because they are generally less susceptible to price volatility.

UBS Asset Management still sees Chinese clients wanting to put money into dollar notes from the country, creating strong demand dynamics amid climbing Treasury yields, according to Hayden Briscoe, head of fixed income Asia Pacific at UBS Asset. In contrast, Indonesian and Indian bonds are largely held by global investors, therefore their performance is more aligned with U.S. and European rates’ volatilities, Briscoe said.

--With assistance from David Yong.

February 22, 2018, 08:19:30 GMT
By Lianting Tu; Edited by Neha D'silva and Finbarr Flynn