2018 surely ranks as one of the most difficult years for fixed income in recent memory, with US 10-year Treasury yields registering a peak-and-trough difference of 80 bps (between 3.2% and 2.4%) and the dollar strengthening broadly against global currencies. Meanwhile, Bloomberg reported that Asian dollar bond market defaults tripled, headlined by China, which saw cases surge from 35 in 2017 to 119 in 2018. According to Wind Information these defaults had a total value of nearly US$17 billion.

During this time, HSBC Private Banking significantly expanded its coverage of fixed income issuers from 200 to 500, growing its Asia focus list to 2,800 bonds. Not only did its selection post zero defaults, but more than 70% of the high conviction trade ideas outperformed their respective benchmarks. In fact, the bank experienced even more fixed income inflows during the month of October — when the high yield benchmark registered its worst losses in more than two years — including a US$130 million leveraged bond portfolio.

Favouring a barbell approach, HSBC Private Banking advised its broader client base to invest in high yield bonds for carry and seven-to-ten-year high-quality investment grade bonds to benefit from potential flattening at the long end of the yield curve. The approach resonated across the region, with the bank’s UHNW segment securing a very sizeable new fixed income portfolio.

In addition to conventional trading and portfolio solutions, HSBC Private Banking expanded its platform and offering in 2018 to create an even more compelling fixed income proposition. It launched a direct access client (DAC) desk for select clients to seek immediate market intel and liquidity. And to further enhance returns, especially for Asia’s buy-and-hold bond investors, the bank introduced a bond borrowing and lending service to boost returns via lending fees.

HSBC Private Banking’s team of 30 fixed income specialists formulates and implements the bank’s investment strategy and recommendations through a deep independent and robust credit selection and removal process, allowing for more flexibility and the opportunity to provide best-in-class bond recommendations.

On the back of a stellar year for investment calls, robust inflows amid a challenging environment, and continued enhancements to its platform and offering, HSBC Private Banking is Asian Private Banker‘s Best Private Bank – Fixed Income Advisory for 2018.