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Asian Junk Bond Market Exposes Cracks

Credit risk rising for companies with lower credit quality as developing economies in East Asia face slower growth.

By David Yong, Bloomberg | Updated on May 14, 2014

Asia’s junk bond returns are lagging behind investment-grade debt like never before as China’s weakest projected growth since 1990 and escalating leverage expose cracks across the region’s economies.

Speculative-grade notes denominated in dollars have gained 2.76 percent this year through May 9, 1.95 percentage points less than high-grade bonds, according to index data compiled by JPMorgan Chase & Co. The underperformance is the worst over the same period since at least 2005. Globally, returns were about even at 4.1 percent, Bloomberg indexes show.

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