Executive Summary

• Despite higher volatility in rates, equities, and precious metals, Asia $ credits were unscathed in January with Asia $ IG/HY tighter by 3/36 bp; Asia IG performance was driven by AA and A rating buckets and the belly (5-7Y), while Asia HY performance was driven by frontier-sovereigns (SRILAN, PKSTAN), Indian NBFIs, and China HY credits; ADIG delivered excess/total returns of +0.02%/+0.08% while ADHY generated excess/total returns of +2.14%/+2.26%.

• We continue preferring duration to credit risk in Asia credits for total-return based investors; we expect Asia spreads to meaningfully widen in 2026 due to rich valuations, lower all-in yields, and US macro and policy uncertainties; we recommend investors keeping high-grade defensive credits as core portfolio holdings, focusing on carry, looking for credit improving stories and special sits opportunities for excess returns; to play duration in Asia credits, we like the long-dated bonds of A-and-above rated names, high-grade fixed-for-life $ Perps that we do not expect to be redeemed in 2026, and bonds with low $-cash prices and positive convexity; we recommend investors diversifying across markets and currencies if allowed by their mandates; we like AUD bonds in particular.

• We launched a Sukuk portfolio containing our picks in the Middle East financials & corporates $ bond space; please refer to the attached spread sheet and the body section for the adjustments to our Asia credit core and thematic portfolios.