HONG KONG, 3 February 2026. CSPI Ratings has today released a research report “Macro and China Offshore Bonds Outlook-Fed Nears Neutral and China Offshore Bond Issuance Marginally Improve”
The key takeaways from this report are as follows:
Fed Nears to Neutral amid Sticky Inflation and Cooling Employment
Against a backdrop of persistent inflation and a gradually cooling labor market, we expect the Federal Reserve’s policy stance to move closer to neutral in 2026. In 2025, U.S. CPI remains sticky above 2%, supported by resilient higher‑income spending. Services inflation remains resilient, underpinned by labor supply constraints and income driven demand. The U.S. labor market is expected to cool further in 2026, but firms’ preference for slower hiring over layoffs should keep downside risks contained and limit the rise in unemployment. Structural labor tightness and services‑sector strength are likely to delay a rapid disinflation path.
As expectations for monetary easing rebuild, the U.S. dollar faces moderate correction pressure, with interest‑rate differentials narrowing marginally versus major non‑U.S. currencies. However, the U.S.’s relative growth advantage should provide a floor. A softer dollar could ease external pressure on the RMB, but policy priorities and interest‑rate differentials suggest a mildly firm, range‑bound path rather than a sustained appreciation cycle.
China Offshore Bond Issuance to Marginally Improve in 2026
China offshore bond issuance moderated in 2025, with net financing turning negative, though currency and sector dynamics diverged. USD issuance held up on Fed easing and a softer dollar, while RMB Dim Sum supply cooled early year before rebounding in second half alongside stronger southbound flows and renewed RMB allocation demand. Property issuance recovered modestly as restructurings shifted toward principal reduction, while LGFV issuance contracted sharply under deleveraging and regulatory constraints. Financials saw lower issuance but remain well positioned to re‑emerge as marginal issuers as USD funding costs decline. We expect the offshore issuance to marginally improve in 2026, supported by elevated 2026–27 maturities. The recovery is likely to be uneven and sector specific.
Convertible bonds, ESG‑labelled bonds, and digital bonds all saw meaningful development in 2025. Convertible bonds have become an important funding channel for technology and growth companies. ESG‑labelled bonds are expected to maintain strong momentum, supported by policy incentives and sustained international allocation demand. Digital bonds, while still at an early institutional stage, are likely to remain focused on pilot and demonstration issuance in the near term.
In 2025, the Markit iBoxx China USD Bond Index delivered a volatile but modestly positive return, with property‑sector performance compressing and high‑yield property bonds experiencing heightened volatility amid ongoing restructurings. Looking ahead, we expect performance to remain driven by Fed easing expectations, domestic policy settings, and global liquidity.
Note: This report is translated from the Chinese version. In case of any discrepancies, the Chinese version shall prevail.
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