Asia credit markets traded mostly wider last week amid concerns over a potential escalation of the Middle East conflict and ahead of the US Federal Reserve’s (Fed) monetary policy meeting later last week.
The Fed decided to keep interest rates unchanged, although policymakers indicated they will not hesitate to act to contain inflation. Sovereign bonds experienced broad-based selling, particularly at the long end of the curve, as market players priced in a higher term premium or the additional yield to compensate investors for a longer investment horizon. This was driven by increased inflation uncertainty and limited forward guidance from policymakers.
By the end of the week, Republic of the Philippines (ROP) and Indonesian (INDON) sovereign spreads were approximately 2-6 basis points (bps) wider week-on-week. The underperformance was more pronounced in INDONs amid the resignation of the Indonesian central bank’s governor.
Asia investment grade (IG) credits also faced a challenging week, with spreads widening steadily, as risk-reduction flows dominated market activity and buyer conviction remained limited. That said, selective buying interest emerged in certain US IG names, as investors took advantage of higher all-in yields. Retail participation remained generally subdued, although demand persisted for Philippine bank issuances and short-dated credits like Oracle and State Bank of India.
Over the weekend, US President Donald Trump announced the cancellation of planned attacks against Iran and indicated that negotiations would begin this week. This contributed to a modest tightening in spreads, with Asia credit spreads moving 1-2 bps tighter. Despite the improvement in sentiment, caution over adding risk at current levels may be considered, given persistent inflation concerns and the uncertainty surrounding the upcoming negotiations.
While there may still be good carry opportunities within an average duration of 2 to 7 years, being slightly defensive in the shorter end of that range may also be preferred to mitigate exposure to interest rate risk.
Note: Rates are indicative (as of August 4, 2026) and subject to refresh.
Note: Note: Rates are indicative (as of August 4, 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.
