Global risk sentiment has improved, helped by a ceasefire between Israel and Iran, as well as signs of US moderation on its tariff stance. The White House has downplayed its July 9 deadline for the end of the tariff pause, and Trump is set to issue unilateral trade deals to those trading partners who have not been able to advance trade negotiations. Improving risk sentiment has also supported Asian USD credit, with our Asian ex-Japan DACS index narrowing towards March lows that were seen before Trump's reciprocal tariffs. However, Hong Kong USD credit is a notable exception, with our Hong Kong DACS index still indicating sticky credit spreads near April highs.

Fragility in Hong Kong credit largely stems from the real estate sector, which comprises nearly half of Hong Kong's total outstanding USD bonds. Sluggish home sales and a weak commercial rental market had led to tighter liquidity for some leveraged developers. Idiosyncratic risks are also being watched after an issuer exercised its option to defer coupon payments and sought a refinancing deal for its maturing bank loans. That said, flush HKD liquidity and a sharp fall in HIBOR rates since May should support homebuying and house prices in Hong Kong. With the Fed also likely to resume rate cuts in the 2H of 2025 that will lower interest costs on USD loans, Hong Kong's real estate USD credit is likely to stabilize.

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.