Marco Update

In November, U.S. macro focus shifted to the reopening of the federal government after the longest shutdown on record, as Congress passed a continuing resolution to fund operations through January 30, 2026. Agencies resumed data collection but adopted revised release schedules. This left policymakers temporarily data-light. U.S. Treasury yield trended higher in the first half of November following the government reopening, then declined in the second half on dovish signals and a weaker jobs report that drove rate-cut expectations higher.

China’s trade performance improved in November as exports rebounded to +5.9% YoY (USD) and imports to +1.9% YoY, lifting the monthly trade surplus to USD111.7bn . This reversed October’s weakness and pointed to resilient external demand. Sentiment was further supported by reduced trade-policy uncertainty after the late-October/November US–China tariff de-escalation and by a firmer RMB on supportive policy and a softer dollar backdrop.

Credit Strategy and Portfolio Changes

Performance of Asia dollar bonds remained steady on lower UST yield despite modest spread widening. During the month, Asia Investment Grade (IG) and High Yield (HY) credit spreads widened by 6bps and 36bps, respectively. The movement in Asia HY spreads was driven by idiosyncratic events, though we believe the spillover effect is very limited. Notably, Asia HY spreads have already tightened back 22bps month-to-date. Overall, we expect credit spreads to remain range-bound towards year-end, given slower market activity. Expectations of U.S. rate cuts and a stable growth outlook in Asia continue to provide a constructive backdrop for Asia credits. Key drivers supporting resilient credit spreads into 2026 include easing trade tension, lower US rates, and reduced default risks for Asian credits.

The December rate cut materialized against a backdrop of a weakening labor market. We expect the Fed to pause briefly in early 2026 after delivering three cuts in 2025. This may modestly lift short-end yields in the near term, presenting opportunities to lock in elevated yields. We maintain our preference for the short to mid-part of the curve, with further easing likely in 2026. Short-end yields are likely to fall further, while long-end yields could stay elevated or rise if inflation or fiscal concerns persist.

China’s Politburo meeting posed no major surprises. Markets are seeking more clarity on how the government will address concerns around growth, consumption recovery, and the property sector. While there is a bias toward monetary easing, we expect any additional rate cuts to be mild, as broad-based stimulus measures appear unlikely. The “anti-involution” theme underscores China’s emphasis on expanding high-tech manufacturing and maintaining export resilience. These factors may sustain the growth outlook and help support overall sentiment in Asia credits.

During the month, we continued to adopt a defensive stance given the general risk-off environment as year-end approached, maintaining neutral duration for the Asia IG portfolio. Fundamentally, most IG sectors in Asia should remain resilient with strong balance sheets and access to funding. For Asia HY, we remain focused on names that have successfully refinanced their bonds and show improving fundamentals. Sentiment in Hong Kong corporate HY bonds has recently improved following the resolution of refinancing challenges and asset disposals by some developers, which facilitated deleveraging.

^{Source: Value Partners, Bloomberg, as at 28 November 2025.
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