March 2026 Asia Credit Market Monthly Report

Macroeconomic Market Update

The performance of US macroeconomic data in February was mixed. On one hand, the minutes from the January Federal Open Market Committee (FOMC) meeting maintained a hawkish stance, with some officials indicating that further interest rate hikes were not ruled out if inflation persisted; at the same time, the rebound in the ISM Manufacturing Index and stronger-than-expected data such as 130,000 new non-farm jobs briefly pushed up US Treasury (UST) yields. However, overall data showed that economic momentum is gradually slowing, with job vacancies dropping to their lowest level since 2020 and Q4 GDP growth at only 1.4% year-on-year, lower than market expectations. Amid rising risk aversion, concerns over economic slowdown, and escalating geopolitical tensions, US Treasury yields ultimately fell by about 30 basis points in February.

At the beginning of March, escalating US-Iran tensions once again drew market attention to inflation. Generally speaking, every 10% increase in oil prices could potentially push up overall US inflation by approximately 0.2 percentage points, while also driving a rise across US bond yields, with the 10-year yield rebounding to around 4.4%, and the spread between 2-year and 10-year yields narrowing further. The subsequent developments in the Middle East situation, along with its impact on oil prices and energy supply, will be key drivers for the future Asian credit market.

Credit Strategy and Portfolio Adjustments

The Asian credit market showed a slight weakening in February, mainly due to renewed escalation of geopolitical risks, uncertainty surrounding US tariff-related laws, and weaker-than-expected inflation data. Although the interest rate environment remained supportive during the month, credit spreads for Asian Investment Grade (IG) and High Yield (HY) bonds widened by 8 and 17 basis points respectively, with higher beta and longer duration assets underperforming.

As we moved into March, market volatility intensified further, with both US Treasury yields and credit spreads widening. Expectations regarding the Fed’s policy shifted to reflect potential rate hikes amid concerns over inflation driven by rising oil prices. During February, we reduced our exposure to longer-dated bonds and locked in some profits, bringing the portfolio’s duration down to approximately 4.6 years (as of the end of February). In the investment-grade space, Indonesian bonds lagged due to sovereign debt-related pressures, while China's tech sector saw credit spreads widen due to tax concerns. Despite holiday effects slowing primary market issuance, bonds issued by high-quality financial institutions in South Korea and Japan continued to attract strong investor demand. We maintain a positive view toward systemically important financial institutions and defensive sectors.

The high-yield bond market showed divergent performances, with certain sovereign bonds and the Indian sector showing weakness, while China's real estate sector benefited from policy support and successful refinancing efforts by some developers, performing better. We continue to prioritize issuers with stable financing capabilities while avoiding sectors significantly affected by geopolitical or policy risks. Overall, we remain cautiously defensive in our investment approach, seeking selective opportunities within the high-yield space, particularly favoring issuers with solid market positions and diversified funding channels.

Read detailed analysis:Value Partners | Asian Credit Market Monthly Report, March 2026

$Value Partners Asian Income Fund (HK0000352291.MF)$$VALUE PARTNERS (00806.HK)$$Value Partners Greater China High Yield Income Fund MDis (KYG9319N1337.MF)$

Source: Value Partners, Bloomberg, MSCI, as of February 28, 2026.

Investment involves risks, and past performance is not indicative of future returns. The above information is for reference only and does not constitute an offer or solicitation to sell, invite purchases of any securities, or recommend any related securities. Investors should refer to the fund's offering documents for detailed information. This content has not been reviewed by the Hong Kong Securities and Futures Commission. Publisher: Value Partners Asset Management Hong Kong Limited.

166K Views