Citi Global Wealth reGioNAL ASSeT CLASS PreviewS | | 87 Investments The Japanese yen appears best placed among FiGUre 3. ASiA PACiFiC FiXeD iNCoMe YieLDS (%) Asian currencies for a snapback. Due to the Bank of Japan’s easing stance, short yen positions Japan 10y Sov 0.3 are at record levels. The reversal will likely be as dramatic as the yen’s 30% weakening through China 10y Sov 2.8 October in 2022. The Australian dollar may also reverse Thailand 10y Sov 2.9 substantially. After an 18% depreciation between April and October, it rebounded 8% in South Korea 10y Sov 3.8 one month on the first hints of peak in US yields. The Reserve Bank of Australia had also been Malaysia 10y Sov 4.4 consistently raising rates and may outlast the Fed’s hikes. China IG (USD) 6.2 The Chinese yuan saw 16% peak-to-trough depreciation in 2022 but could see a comeback Asia ex-Japan IG Corporates (USD) 6.6 in 2023. Some suspect that China’s recovery may weaken its currency because its import India 10y Sov 7.3 demand would rise, while exports fall as the US economy stutters. However, the Chinese yuan’s Indonesia 10y Sov 7.0 depreciation resulted mainly from Chinese government bonds’ 1% positive carry turning to Asia ex-Japan Sovereign (USD) 7.1 a 2% negative carry versus US Treasury bonds. This gap is likely to narrow if China stages a Asia ex-Japan HY Corporates (USD) 20.4 recovery and emerges from deflation, lifting Chinese yields in 2023, while US yields likely fall. China HY (USD) 27.8 0 5 10 15 20 25 30 Source: Bloomberg Barclays, Bloomberg and The Yield Book, as of 24 Nov 2022. Past performance is no guarantee of future returns. Real results may vary. Indices are unmanaged. An investor cannot invest directly in an index. They are shown for illustrative purposes only and do not represent the performance of any specific investment. Past performance is no guarantee of future results.