‘Juicy’ Asian Credit Attracts UBS Wealth in a Low-Yield World

(Bloomberg) -- Asian credit is attractive because of its relatively high yields amid a dearth of many other options, according to UBS Wealth Management.

High-yield dollar bonds from the Asian region are “juicy” right now -- sitting about 2 percentage points above their 10-year average, said Hartmut Issel, head of Asia-Pacific equities at UBS Wealth.

“Given how much dollar liquidity the Fed has pumped in, it’s difficult whether it’s in euros, yen or dollars to get yields anywhere,” Issel said in an interview. “So you have a segment that offers you in excess of 7%, even though it’s not quite as high as it was in March.”

He said the firm is also recommending Asian investment-grade bonds as “it’s one of the few regions where you still get at least some yield.”

UBS Wealth’s stance dovetails with that of Loomis Sayles Investments Asia Pte, which likes Asian high-yield dollar bonds after past de-leveraging, and sees the default rate at 4% in 2020 -- about half that expected for the U.S.

But the asset class has drawn caution from firms including Goldman Sachs Group Inc., which said recently that stresses will probably continue to emerge in Asia’s credit markets in the second half of the year and noted signs that Chinese policy makers are taking a “less dovish approach.”

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