Now is the time for Asian high yield investors to consider going global
For Asian high yield investors, the case for going global is becoming harder to ignore. As growth, inflation and policy diverge across regions, a broader opportunity set gives investors more freedom to target the potential best opportunities.
Key Takeaways
- A global approach to high yield bond investing can offer Asian investors diversification, scale and flexibility to capitalise on regional differences in growth, rates and policy.
- Adding exposure to US high yield is especially attractive because we believe the market is less exposed to energy-driven inflation than either Asia or Europe.
- Average global high yield credit ratings are similar to Asia but the opportunity set is larger; the yield difference between Asian and US high yield is close to lows.
For clients seeking an attractive long-term allocation within high yield bonds, we believe a global approach stands out against Asia-only. A regional mandate narrows the investable universe to one market and one dominant currency, whereas a global strategy opens access to the US, Europe, the UK and emerging markets. The difference is material: the global high yield universe is worth roughly USD 2.4 trillion – over 50 times the size of the Asian high yield universe and 60% larger than the US high yield universe.1
Adding US high yield bonds to Asian portfolios may be particularly beneficial in the current environment because the US appears to be less exposed to the energy price shock than Asia. Is now the time for Asian high yield investors to go global?
Asia is more exposed to Iran crisis than the US
The situation in the Middle East remains fluid; however, a few implications have emerged that are likely to affect credit fundamentals. Rising energy prices have already impacted inflation around the world, and although oil prices appear to have passed their peak, we think they are likely to remain above pre-war levels. Capacity has been destroyed and will take time to rebuild.
These pressures will be felt most strongly in Asia and Europe, which are more reliant on energy imports than the US. Higher energy prices also feed through into fertiliser and pesticide costs, adding pressure to food prices. We note that credit fundamentals globally remain reasonably strong, and we do not expect a rapid increase in default rates, but we believe the momentum is more likely to turn negative in Asia than in the US within the same rating categories.
The US is not immune to inflationary pressures, of course. We expect interest rates globally to remain high and potentially rise further. Leverage and interest coverage ratios in Asia remain worse than the US, however, with Asia less able to absorb higher refinancing costs (Exhibit 1). Additionally, the short-term to total debt ratio is higher in Asia than in the US (Exhibit 2). This means Asian companies will need to refinance earlier, while also facing higher rates and weakening fundamentals.
Exhibit 1
US and Asian leverage and interest coverage ratios
Source: Bank of America, February 2026.
Exhibit 2
The short-term to total debt ratio is higher in Asia than the US
Source: Bank of America, February 2026.
Based on this analysis, we believe the US is currently more appealing than Asia or Europe for high yield bond investors. Some parts of the Latin American and African markets may also benefit from lower energy prices. Although these markets are much smaller than the US, they may be useful diversifiers for Asian investors.
Given our expectation of an inflationary environment, it’s worth mentioning that, as an asset class, high yield across all regions can benefit from inflation. When it supports nominal earnings while debt remains unchanged, this can allow for faster deleveraging. In addition, if all-in yields rise, the need for allocations to equity and less liquid asset classes may fall, which can provide technical support for the market.
Global high yield allows investors to pick the sweet spots
A key argument for a global approach is that it offers investors a larger universe of high yield bonds – more issuers, more sectors, deeper liquidity and a broader opportunity set (Exhibit 3). Credit spreads in Asia are currently about 60 basis points higher than the US. This compares with about 85 basis points a year ago using the same indices. Given our view that the US offers more defensive credit-fundamental momentum as well as stronger credit metrics, we are not convinced that this difference in spread is wide enough. Asian investors therefore have room to adopt a more global approach, without giving up too much spread, while dramatically increasing diversification.
Exhibit 3
Comparison of credit spreads across high yield markets
Source: ICE, 30 April 2026. EUR equivalents using a one-year cross-currency spread matrix. Table excludes CEEMEA and CAD HY which are included in global high yield statistics.
Asia offered abnormally high yields during the China property crisis, but this was not reflected in returns. Over the past two years, many weak credits are no longer in the Asia index and this has led to a normalisation of yields. As a result the extra yield offered by Asia is close to the lows of the last 10 years (Exhibit 4).
Exhibit 4
Comparison of yields between Asia and global high yield
Source: Allianz Global Investors, May 2026.
History also supports the case for staying global. No single high yield market has led performance consistently over time. Return leadership across European, UK, US and emerging market high yield has rotated frequently from year to year, with meaningful differences between the best and worst-performing regional markets (Exhibit 5). For investors, that is a powerful argument against a static home-market allocation and in favour of a strategy that can move dynamically toward the most attractive opportunities as valuations and fundamentals change.
Exhibit 5
Annual returns of regional high yield markets
Total Return % – USD hedged
Source: Allianz Global Investors, Bloomberg, ICE Bank of America Merrill Lynch, 31 March 2026. Past performance does not predict future returns.
Importantly, choosing global does not mean giving up the attractive features of Asian high yield. Asia still offers appealing spread and quality characteristics, and we see clear value in selected parts of the market. The advantage of a global strategy is that it allows clients to retain that exposure while avoiding unnecessary concentration. It also enables a more selective stance towards the weakest credits, where default risk remains concentrated in more esoteric issuers with thinner equity cushions and weaker liquidity. In our view, the ability to combine higher-quality Asian exposure with the best opportunities from the US and other markets is a much stronger proposition than remaining confined to one region.
1 Source: ICE BofA indices, June 2026.
