Executive Summary

• US macro, rates & credit views: we expect the Fed to cut rates by 100 bp to 3.0% in 2026 as labor market concerns overtake inflation fears; we maintain our call for the 10Y US Treasury (UST) yield to decline to 3.5% by year-end 2026; we target US IG spread at 120 bp, which implies an excess return loss of 140 bp but a strong total return of 7.3% given our bullish Treasury view; we remain Underweight US HY but prefer it to BSL as base rates decline.

• Asia credit 2025 key takeaways: Asia $ credits delivered better total returns than US and Euro peers, but trailed EM $ sovereigns; the gap between Asia IG and HY returns has narrowed; for total return mandates, our call of extending duration in high-grade IG credits played out; for excess return mandates, moving down the rating spectrum has been an effective strategy; our Asia $ IG core picks and thematic portfolios outperformed the Asia IG index in total returns this year; our Asia $ HY core picks were on par with the Asia HY index.

• 2026 Asia credit spread view: we target Asia $ IG spreads at 100 bp, resulting in an excess return loss of 140 bp, and we see Asia $ HY widen to 440 bp; the decompression is driven by lower UST yields, stretched spread valuations, and a reduced technical tailwind; we recommend focusing on carry instead of compression, and adopting a balanced approach to credit risk by positioning in high-grade credits and IG beta, as well as HY names with credit improving stories or special sits opportunities.

• 2026 Asia credit duration view: for total return mandates, we have an Overweight allocation to Asia $ IG credits; to express our bullish US duration view, we like intermediate (5-10Y) and long-duration (>10Y) UST, extending duration beyond 7Y in high-grade Asia $ credits, and low $-price Asia $ IG credits with positive convexity; for excess return mandates, we are cautious about the long-end (>10Y), and see the best value in the front-end.