Asia credit markets traded with a cautious tone for most of last week, as rising benchmark US Treasury yields and expectations of a Federal Reserve (Fed) rate hike weighed on sentiment.
Sovereign bonds saw generally subdued activity, as investors remained cautious and favored shorter-dated bonds over longer-duration exposure. Investors notably added Indonesian quasi-sovereigns, targeting recent underperformers that could outperform as market sentiment improves. Overall, sovereign spreads finished the week around 1-3 bps tighter, recovering from highs of 3 bps wider. The front-end of the curve outperformed duration for most of the period.
Asia investment grade (IG) corporates continued to navigate a heavy primary market calendar, led by financial issuers from India. New issuance supply remained the dominant theme throughout the week, though the market generally absorbed deals well. Indian financials underperformed early in the week amid supply concerns, while Japanese financials outperformed.
Broader Asia IG spreads traded within a relatively tight range, fluctuating between 2-4 bps wider and 1-3 bps tighter depending on sector and rating quality. Higher-quality front-end paper continued to attract demand, as investors sought attractive all-in yields while maintaining a defensive posture.
Retail activity remained concentrated in familiar names such as BDO Unibank Inc., Security Bank Corp., Oracle Corp., and Indian financial issuers, while Philippine corporates generally traded slightly lower before recovering into the end of the week.
Market focus may shift away from the Fed meeting and back toward the trajectory of benchmark US Treasury yields. While the Fed’s rate hike was largely anticipated and well digested by markets, investors may still look for further guidance on the Fed's path and the resilience of US economic data.
Higher-quality front-end paper should continue to find support from investors seeking attractive yields, while longer-dated bonds remain more sensitive to rates volatility.
For Asia sovereigns, local demand continues to provide an important anchor, particularly in Republic of the Philippines and Indonesian sovereign bonds. However, unless US Treasury yields stabilize, investors may remain reluctant to add meaningful duration.
In the IG corporate space, the market's ability to continue absorbing primary issuances of new bonds will remain a key test of sentiment.
Note: Rates are indicative (as of September 22, 2026) and subject to refresh.
Note: Note: Rates are indicative (as of September 22, 2026) and subject to refresh.
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DANA LOUISE GERONIMO is an Investment Counselor at Metrobank under the Markets Advisory 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.
