Volatility in Asian US dollar bond market may present opportunities

Rising gross new volumes are fueling the rapid expansion of the Asian US dollar-denominated bond market

Aug 1, 2018 | Invesco Fixed Income

The Asian US dollar-denominated bond market has grown quickly in recent years, currently exceeding USD1 trillion in size. This expansion has been fueled by rising gross new issue volumes. As of the end of 2017, new issue volume accounted for around one third of the total market, with a large proportion of both the issuer and buyer base being Chinese institutions.

At the same time, the Chinese authorities have been implementing their policy goals of opening the domestic market, reducing leverage in the financial system and normalizing the credit curve. This presents both opportunities and challenges for the asset class. The latest policy announcements (around the weekend of July 21) have eased credit conditions relative to the direction of travel indicated in the April release of new asset management rules - and have been taken very positively by the market.

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