Data provided by Solve Advisors Inc

Domestic demand in Asia has begun to rally as governments now look to re-open economies marking the end of the pandemic lockdowns. As per data from Solve, the sovereign 5-year CDS spreads for Malaysia and Indonesia declined 14% from April 29th, 2022, through May 31st, 2022.

In Malaysia, the CDS spreads dropped by 12 bps over the month from 90 bps to 78 bps (for the Malaysian Sovereign CDS). The country’s bond market is likely to see an augmented issuance in near future by the corporate sector and government, that is supported by the country’s transition into an endemic phase. Analysts project Putrajaya to issue around RM 175 billion worth of bonds this year compared to the RM 163.2 billion issued in 2021.

Indonesia displayed a similar trend with the CDS spreads dropping by 17 bps, from 117 bps to 100 bps across the month. The economy was supported by rise in commodity prices and relaxation of Covid-19 restrictions which led to the country’s currency growing stronger towards the end of the month.

Yields for both countries continued their downward trend in May with 5-year Malaysian government bond yields decreasing from 3.92% to 3.73%; and 5-year Indonesian government bond yields decreasing down from 6.32% to 6.18% (closing figures from 29th April to 31st May) as sovereign bonds rallied on increased investor demand in these markets.

Additionally, On May 25th, global investment firm KKR announced a successful raise of $1.1 billion for its first credit fund dedicated to investments in the APAC region. Termed as the KKR Asia Credit Opportunities Fund (ACOF), the pool has received financing from sovereign wealth funds, insurers, and private investment groups. Notably, Asian private credit funds have gained traction in recent times as companies are looking to tap into alternative sources of funding, though banks still account for the majority of financing. Prospects of higher returns are drawing investors towards credit funds, especially now as Covid restrictions ease.