That's the picture Rong Ren Goh, Head of Macro and Thematics, Asian Fixed Income at Eastspring, and Clement Chong, Head of Credit Research, Fixed Income, set out in their latest analysis. Their core view: there are still pockets of opportunity in Asian bonds, but the easy beta is gone, what works from here depends on which economies you pick.

The most important shift is psychological. A year ago, the question was how quickly Asian central banks could ease. Today, the question is which ones might have to hike.

Recent currency weakness has forced the recalibration. Several Asian central banks are now openly considering rate hikes to defend their currencies, particularly those running weaker balance-of-payments positions. The 2026 path is no longer about cuts versus holds - it's about holds versus hikes.

The US picture is no clearer. Markets are currently pricing in roughly 20 basis points of hikes for the rest of 2026 and another 30 basis points in 2027, but the inflation trajectory keeps shifting under those expectations.

"We remain cautious on adding duration even after the recent rise in yields, as data over the coming months is likely to reflect stronger inflationary pressures.", Rong Ren Goh

A near-term relief rally is possible if the Middle East conflict resolves quickly, Goh notes, but a sustained bond rally would require something more structural: a prolonged focus on weakening global growth.

With duration looking unattractive, the more interesting question for Asian local currency bonds is which currencies hold up. Eastspring's framework is straightforward: favour economies with stronger balance-of-payments positions, and stay cautious on the high yielders that are most exposed to energy prices.

That produces a clear hierarchy:


  • - AUD bonds - attractive carry, supported by a resilient external position.
  • - SGD bonds - should continue to benefit from the currency's safe-haven status and Singapore's relative economic resilience.
  • - Longer-dated Thai sovereigns - an interesting opportunity, given that the Bank of Thailand is unlikely to hike rates against a weak domestic backdrop.
  • - KRW and TWD - likely to be supported as the AI capital expenditure cycle broadens beyond the initial infrastructure beneficiaries.
  • - INR, IDR and PHP - the high yielders look more vulnerable. Higher energy prices are likely to weaken their balance-of-payments positions further, putting their currencies under pressure.

The AI angle on Korea and Taiwan is worth dwelling on. As the AI investment cycle expands from data centre buildout to the broader hardware supply chain, both economies stand to benefit through export earnings, and, by extension, their currencies.

The credit side of the story is more constructive than the macro backdrop would suggest. The JACI APAC universe is largely investment grade, and according to Chong, it is well positioned to navigate an environment of higher inflation and slower growth.

The performance numbers back this up. Asian high yield has outperformed its US counterpart year-to-date, while Asian investment grade has tracked broadly in line with US investment grade. Fundamentals across Asian corporates remain relatively healthy.

That said, the pressure points are becoming visible. Manufacturers are dealing with longer delivery times and higher input costs, and earnings revisions could turn more negative as margins compress. The important nuance: this is an earnings story, not a balance-sheet story. Companies are largely entering this period with the financial cushion to absorb it.

The impact won't be uniform. Refining, transportation, and autos are the most exposed to higher energy prices and supply chain disruption. Most other sectors look capable of weathering it.

Geographically, the same split holds as on the rates side. India, Indonesia, and the Philippines face a more challenging macro outlook, while the rest of the region looks fairly resilient.