Asia credit markets traded under a notably weaker tone last week, as escalating geopolitical tensions in the Middle East, rising oil prices, and higher benchmark US Treasury yields weighed on risk sentiment.
In the sovereign space, investors remained largely in de-risking mode. Indonesia-specific developments, such as the country’s proposed “panda bonds” (Chinese yuan-denominated sovereign bonds) and new Danantara quasi-sovereign issuances, contributed to increased selling interest in the long-dated instruments issued by the nation. By Friday, spreads of Philippine and Indonesia sovereign bonds were approximately 5-10 basis points (bps) wider week-on-week, with the heaviest underperformance seen in belly and longer-dated tenors.
Asia investment grade (IG) corporates also endured a challenging week, as spreads widened steadily through much of the period. De-risking flows dominating market activity and limited conviction from buyers. Retail activity remained subdued, although demand persisted in select Philippine banking and corporate names. On a weekly basis, Asia IG spreads also finished approximately 5-10 bps wider, while Philippine corporate cash prices ended broadly lower.
Looking ahead, we expect market direction to remain highly news driven, with developments in the Middle East and oil price movements continuing to dictate risk sentiment. While wider spreads and higher all-in yields may create selective buying opportunities, remaining cautious and defensive may be preferred—focusing on high quality, front to belly tenor paper or roughly the 2- to 7-year space.
Given the lack of actual 7-year options in the market now, investors may consider allocating small amounts to our 9- to 10-year top picks, as a way to modestly extend average duration. However, there also continues to be plenty of sovereign and corporate names in the 4- to 5-year area, with all-in yields not too far behind. These bonds should allow for nimble positioning, with a bias toward keeping risk light until greater clarity emerges on the geopolitical and rates outlook.
Note: Note: Rates are indicative (as of July 27, 2026) and subject to refresh.
Note: Note: Rates are indicative (as of July 27, 2026) and subject to refresh.
For more information on foreign currency-denominated bonds, you may reach out to your Wealth Specialist or log in to Metrobank Wealth Manager.
DANA LOUISE GERONIMO is an Investment Counselor at Metrobank under the Institutional Investors Coverage Division. She built her expertise through her previous roles as an Investment Specialist and as a Financial Markets Sector Management Trainee within the bank. Dana holds a Master’s degree in Industrial Economics from the University of Asia and the Pacific. Outside of work, she enjoys exploring different fitness centers and reading.
