Asian Junk Bonds Expected to Deliver High Single-Digit Returns in 2025
PineBridge Investments and JPMorgan Asset Management remain optimistic about the Asian junk bond market, despite recent stresses in the Chinese property sector. The firms expect the region’s high-yield debt to deliver a high single-digit return by year-end, with yields around 10% and default rates declining this year.
Asian Junk Bond Market Diverges from Global Peers
The Bloomberg index of Asian speculative-grade debt has lost 0.5% so far this year, following a 15% gain in 2024, its best performance in 12 years. In contrast, indexes for US and global high-yield debt have gained around 1.2% so far in 2025.
Junk Bonds Outside of Chinese Property Sector Hold Up
PineBridge notes that junk bonds outside the Chinese property sector are broadly holding up, with eight of 10 sectors in a Bloomberg Asian high-yield index returning gains so far this year. These include utilities and basic materials. This is backed by the firms’ view that the Asian market for riskier bonds will turn in a high single-digit return by year-end.
Companies in the Region Have Healthy Balance Sheets
PineBridge’s co-head of Asia fixed income, Andy Suen, noted that companies in the region have fairly healthy balance sheets and are able to withstand any mild deterioration in the macro backdrop. Additionally, Asian junk bonds have a shorter average maturity compared with US peers, making them less sensitive to interest rate moves. The average duration of the junk bonds, an indication of price sensitivity to rate moves, from Asia is 2.65 years compared with 3.02 years for US peers.
JPMorgan Asset Management Sees Attractive Opportunities
JPMorgan Asset Management’s Asia fixed-income chief investment officer, Julio Callegari, believes that Asia high yield will still offer decent returns for the full year 2025, despite the challenges in the Chinese property sector. He also sees a "reasonable" economic outlook for Asia as favourable for the asset class.
Government Bonds and Corporate Debt Show Promise
Government bonds from Pakistan and Sri Lanka, as well as corporate debt of borrowers from Macau, Indonesia, and India, have all made significant gains so far in 2025, according to Bloomberg data. Bonds of Indian renewable energy firms, Macau casinos, and contingent convertible debt from banks in some Asian countries are also attractive, according to JPMorgan Asset Management.
Conclusion
PineBridge and JPMorgan Asset Management remain optimistic about the Asian junk bond market, despite recent stresses in the Chinese property sector. With yields around 10% and default rates declining, the firms expect the region’s high-yield debt to deliver a high single-digit return by year-end.
Frequently Asked Questions
Q: What is the outlook for the Asian junk bond market?
A: PineBridge Investments and JPMorgan Asset Management expect the region’s high-yield debt to deliver a high single-digit return by year-end, with yields around 10% and default rates declining this year.
Q: How are junk bonds outside of the Chinese property sector performing?
A: Junk bonds outside the Chinese property sector are broadly holding up, with eight of 10 sectors in a Bloomberg Asian high-yield index returning gains so far this year.
Q: What is the average duration of Asian junk bonds?
A: The average duration of the junk bonds, an indication of price sensitivity to rate moves, from Asia is 2.65 years compared with 3.02 years for US peers.
Q: Are there attractive opportunities in the Asian high-yield market?
A: Yes, bonds of Indian renewable energy firms, Macau casinos, and contingent convertible debt from banks in some Asian countries are attractive, according to JPMorgan Asset Management.
