US Treasury yields have continued their upward trajectory, with the benchmark 10y Treasury yield surpassing 5.20% and reaching its highest level since June 2007. Historically, such elevated US rates have posed challenges for emerging market (EM) credit, given the vulnerability associated with foreign currency borrowings. A further sharp rise in US yields could dampen foreign investors' appetite for EM credit and intensify depreciation pressures on EM currencies. These dynamics could potentially trigger adverse feedback loops if confidence in policymakers' ability to maintain currency stability is lacking.

Despite the rise in US rates, emerging Asian USD credit markets have remained broadly resilient. Our Asia ex-Japan DACS index continues to hover near recent lows, although credit spreads have diverged between North and South Asia. In particular, India and Indonesia credit markets are seen as more vulnerable to elevated oil prices than their North Asian counterparts. Looking ahead, a sustained increase in global bond yields could heighten the risks of debt-market contagion. Given the currently tight spreads in Asian USD credit markets, a more cautious stance may be warranted.

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.