DBS Aggregate Credit Spread (DACS) Indices

Analyse country and sector credit risks through our proprietary spreads tracking model

 

Despite widespread concerns stemming from US-China trade tensions, elevated political uncertainty in Korea, and a US SEC lawsuit against a major Indian conglomerate, Asian credit spreads remain near record lows. Markets are seemingly climbing a wall of worry as the risk of defaults appears contained. In USD credit markets, China's default rate has fallen significantly, while Hong Kong, Korea, India, and Indonesia have experienced no defaults this year. New Chinese support measures for LGFVs this year have helped alleviate investor fears, with China allowing an additional CNY10trn of special local government bond issuance to bring hidden local debt onto the balance sheet over the next 5 years.

A December FOMC rate cut should further lower the interest burdens of Asian corporates, benefiting the Hong Kong real estate sector. Even if 2025 Fed rate cuts are less certain due to potential Trump tariffs, local interest rates in Asia are still expected to ease with Asian central banks prioritizing growth. In China, monetary policy is slated to shift from "prudent" to "moderately loose", with further LPR and RRR rate cuts likely next year. Lower interest expenses and stronger Chinese growth should continue to support the credit profiles of Chinese companies in 2025.

DBS Aggregate Credit Spread or DACS indices show the aggregate credit spread, weighted by market capitalization and modified duration, for Asian corporate USD-denominated straight bonds. The higher is the DACS, the higher is the additional yield that can be earned in credit, and the higher is the perception of credit risks in markets.

Our first visual shows the notional outstanding of bonds from five Asian economies that comprise the Asia ex-Japan (AXJ) DACS index. These five economies are China, Hong Kong, Korea, India and Indonesia.

The second visual shows the notional outstanding split into industry sectors for the aggregate AXJ DACS index, and DACS indices for each of the five economies. Individual economies can be selected via the dropdown.

Our last visual illustrates the DACS index readings over time for AXJ or an individual economy. It is also possible to drill into the constituent sectors of the DACS indices using the second dropdown. Such sectoral DACS indices are shown on an individual economy basis when data is sufficient, and on an aggregated AXJ basis when otherwise.


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