Fixed-income research poll: part 1

Thailand is the Asian sovereign most likely to be downgraded according to our annual fixed-income research poll of 354 fixed-income investors.
Over the month of September, FinanceAsia once again conducted its annual fixed income research poll. The poll is designed to reflect the outlook of AsiaÆs fixed-income investor community, of whom 354 voted.

The poll has several components. It seeks to analyse market participants' views on the Asian markets, views on credit rating agencies, as well as voting for the best borrowers and, of course, the best banks at producing credit research. In this first instalment, we release data about investors' market views.

The outlook for Asian fixed-income looks to be bullish. Out of 354 investors, only 35 said they would decrease their exposure to Asian bonds, and 197 said they would increase it (122 would maintain their current levels).

The outlook for high yield is also pretty optimistic - despite a tough year for high yield in the secondary market and the default of Ocean Grand. Only 79 said they would cut their exposure to Asian high yield with 136 increasing it and 137 maintaining it.

In the third and fourth categories, we asked respondents for their predictions on the most likely sovereign upgrade and downgrade.

China was reckoned to be the most likely to be upgraded with 145 votes (followed by Indonesia on 143). On the downgrade front, the overwhelming winner was Thailand, with 176 votes (and Taiwan second with 96). In Thailand's case, sentiment on the recent coup may be a key factor in its topping this category.

Interestingly, the Philippines continues to divide opinion. It ranked fourth in the most likely to be upgraded category with 112 votes; and ranked third in the most likely to be downgraded category with 85 votes.

The fifth category sought to determine the market's expectations on the direction of Asian bond spreads. Here the forecast seems to indicate a somewhat directionless market given that 119 thought they would widen, 112 that they would narrow and 123 that they would stay about the same.

In the final category, we asked investors to predict where the 10-year Treasury yield will be on October 1, 2007. According to a mean average of the 493 votes it will be at 4.93%. However,the median average is probably a better way of analysing this data, since it filters out the outliers. The median forecast is 4.76%. This is almost perfectly in line with the one-year future for 10-year Treasuries, which at the end of last week was trading at 4.78%.
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