Bank of China Securities·2026-01-09 07:18Report Industry Investment Rating No relevant content provided. Core Viewpoints - In 2025, Chinese USD corporate bonds delivered high - single - digit returns (6.87%), showing overall resilience but slightly underperforming the broader Asia ex - Japan USD corporate bond universe (7.47%) due to the Vanke onshore debt maturity extension talks at year - end [4][5][6]. - Chinese IG bonds performed marginally stronger than HY bonds. The decline in sub - 10 - year US Treasury yields supported Chinese IG bonds, and their spread tightening outpaced that of HY bonds [4][15][24]. - The issuance volume in the Chinese USD bond primary market rebounded in 2025, but the net issuance was still deeply negative due to large - scale maturities, redemptions, and buybacks [4][39][40]. Summaries by Related Catalogs Performance Analysis - Chinese corporate bonds had a total return of 6.87% in 2025, lower than the 7.47% of the Asia ex - Japan corporate bond index and 7.75% of the iBoxx Global USD Corporate Bond Index [5][6]. - The iBoxx USD China IG Index posted a 6.87% total return, outperforming Chinese HY bonds but trailing the 7.51% return of the Asia ex - Japan IG index. Chinese HY bonds had a 6.70% return, significantly below the 9.38% of the Asia ex - Japan USD HY index [7][10][14]. Market Analysis - In 2025, the decline in sub - 10 - year US Treasury yields supported Chinese IG bonds. The Fed cut rates in September, October, and December and restarted balance - sheet expansion in December [15][19]. - By year - end, 2 - year, 5 - year, and 10 - year Treasury yields declined by 77bps, 66bps, and 40bps respectively, while the 30 - year yield edged up 6bps, steepening the yield curve [16][19]. - In 2026, the actual number of Fed rate cuts may exceed expectations due to a potentially more dovish voting committee [17][19]. Spread Analysis - Chinese IG bond spreads tightened by 24bps to 47bps in 2025, driven by negative net issuance and strong investor demand. Chinese HY bond spreads tightened by 16bps [24][25][28]. High - Yield Financing Environment - Some HY industrial and property developers returned to the primary market in 2025 with over - subscriptions, but Vanke's onshore bond extension affected other HY property developers' offshore refinancing [30][33]. - The government focused on stabilizing the property market. Developers' operations continued to diverge, and the sector was in a bottoming - out phase. Quality SOE and central SOE property bonds are preferred [31][33]. - Chinese developers' default resolution and restructuring deepened, and creditors shifted focus to more sophisticated claims protection [32][33]. Sector Performance - In IG, tech, property, and AMC bonds had returns over 8% as spreads narrowed. Central SOE perpetual and bank senior bonds had lower returns. In non - defaulting HY, HY industrial bonds had 15.9% returns, and HY property bonds had 8.8% returns despite the Vanke incident. Bank AT1 bonds underperformed with 5.5% returns [37][41]. - In the broader Asia ex - Japan credit market, bank, basic materials, and consumer services sectors had total returns above 8% [38][41]. Issuance Review - In 2025, the Chinese USD bond primary market issuance volume rebounded to US$101.7bn (+23% YoY). Excluding restructuring issuances, new issuance rose 6% YoY to US$81.1bn. Net issuance was deeply negative due to US$155.5bn of maturities, redemptions, and buybacks [4][39][42]. - Chinese issuers' activity in the Asia ex - Japan USD bond market increased slightly, accounting for 47% of total issuance volume compared to 43% in 2024. Non - Chinese Asia ex - Japan issuers' issuance volume grew 7.6% to US$116.4bn [40][42]. - Monthly issuance peaks were in February, May, September, and November, supported by financial and sovereign issuers. IG non - financial corporates' issuance was sensitive to USD interest rates. Rated HY bond volume increased, with non - property issuers dominant. Unrated bonds mainly came from LGFVs, small - scale leasing companies, and property restructuring [44][46]. - In 2025, issuance was mainly under 4 years (76.3%), but demand for longer - term funding emerged. The industrial sector became the largest issuer group (41%), overtaking the financial sector (32.7%). Property sector issuance was 22.4%, mainly for debt restructuring. LGFV issuance decreased to 29.8%. SOEs dominated new issuance (72%), and non - SOE issuers' proportion rose to 28% [45][47].