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Economy

Asian corporate bond rally has gone too far

Despite region's advantages, yields too low to compensate for market risks

| Vietnam
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Asia accounted for most of the $120 billion in dollar-denominated emerging market corporate bonds issued in the first quarter.   © Reuters

For an indication of just how resilient emerging market assets have been since the upset victory of Donald Trump in the U.S. presidential election, look no further than Asian corporate bonds.

Asia's emerging markets, which account for 45% of the mainly dollar-denominated stock of corporate debt in developing economies and over half of last year's issuance, has experienced a sharp tightening in spreads. This can be seen in the narrowing gap between the average yield on the Asian component of JPMorgan Chase's Corporate Emerging Market Bond Index and benchmark U.S. borrowing costs. China accounts for over a fifth of the debt stock and generated more than a third of supply in 2016.

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