2024 Market Outlook – Navigating transitions. Seizing opportunities.
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Asia Investment Grade bonds’ higher yields may appeal
Yield to Worst (%)
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20 Sep-21 Sep-22 Sep-23 IG Asia Credit Yield to Worst 5-Yr US Treasury
Source: JP Morgan (JACI Investment Grade Index), Bloomberg, 23 October 2023.
The US’ ballooning fiscal deficit and the Fed’s Quantitative Tightening programme are causing demand-supply imbalances in the US Treasury market. Nevertheless, we believe that inflation and growth trends would drive treasury yields in the medium term. That said, renewed bond market volatility cannot be ruled out.
In general, investors would need to get used to volatility in both the equity and bond markets. Diversification remains an important component in investors’ tool kits. Investors who want exposure to equities can also use multi factor and low volatility strategies to navigate the uncertain market and economic climate. Multi factor strategies offer diversified exposure to different factors that capture economic changes. Meanwhile, low volatility strategies provide stability by mitigating the downside risk in investor portfolios.
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