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Asian Dollar Bond Monitor: The Trump Card


Asian Dollar Bond Monitor: The Trump Card

in Thematic & Strategy

Trump's rhetoric and rising political risk could increase market volatility which should sustain fund flow into bonds.

We turn underweight on Asian USD bonds and recommend an active bond trading strategy through the primary market, credit selection, and a buy-on-dip strategy in order to gradually build up a spread premium to cushion against rising rates. A strong performance of Asian USD bonds since the beginning of this year limits prospects for further spread tightening, in our view. We also see Asian USD supply overhang and rising defaults in China as two major headline risks.

On the other hand, global reflation trade and China's improving recent macro data leads us to believe bond funds will switch more allocation to bonds denominated in currencies (RMB and AUD), previously affected...

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