Local currency (LCY) bond markets have unequivocally solidified their position as a global financial bright spot for investors in 2026, offering exceptional resilience, deep diversification, and highly attractive carry amid macroeconomic uncertainties.

Over the past year, outstanding LCY bonds in emerging East Asia surged to a staggering US$30.6 trillion, fuelled by accommodative monetary policies and an impressive US$12 trillion in new issuance led by China, according to the Asia Bond Monitor published by the Asian Development Bank (ADB) on March 11. A defining component of this growth has been the significant rise of sustainable finance, with Asean+3 sustainable bond issuance hitting a record US$275.9 billion last year. This has pushed the region's ESG-focused stock past the monumental US$1 trillion milestone.

Reflecting this stellar trajectory, LCY bonds outperformed their developed-market counterparts in 2025, catalyzed by regional rate cuts, tighter credit spreads, lower risk-free rates, and a broadly weaker US dollar. And so far in 2026, performance remains positive, with carry acting as the primary driver for total returns. Crucially, domestic fundamentals are now dictating market performance more than global factors, significantly reducing the region's historical sensitivity to US interest rates.

Investors are finding substantial opportunities to capture real-yield pickup, with yields remaining supportive across the board, such as South Korea's 10-year government bond offering around 3.68% in mid-March. Furthermore, the broader LCY market is anticipating a structural demand boost as South Korean government bonds officially enter the FTSE Russell World Government Bond Index this April.

However, the financial landscape has not been without its hurdles. March brought renewed foreign exchange pressures triggered by geopolitical risks, specifically the ongoing Iran conflict, alongside higher oil prices and temporary US dollar strength. Consequently, currencies like the Indonesian rupiah, Indian rupee, South Korean won, and Philippine peso hit multi-year or record lows.

Yet, the resilience of the LCY market was on full display as central banks responded forcefully to defend their currencies. Indonesia pledged firm FX interventions, while India aggressively intervened by purchasing approximately US$11 billion in bonds. Bolstered by robust FX reserves held by major Asian central banks, which have risen by US$600 billion since late 2024, and anchored by domestic banks in the region holding 35.7% of LCY treasury bonds as per the ADB report, these swift actions successfully capped currency volatility and limited market downside.

Looking ahead, the consensus among major financial houses remains highly constructive for the remainder of 2026. To fully capitalize on these conditions, several LCY bond investors have stressed the need for active country and sector selection, dynamic duration management, and careful FX overlays.

Cutting through the noise

Navigating such a dynamic, fast-evolving ecosystem requires not just capital, but top-tier human expertise and institutional reliability. This is what makes the Asset Benchmark Research (ABR) Local Currency Bonds Benchmark Survey more critical now than ever.

As the long-standing data analytics unit of The Asset, ABR conducts the annual Local Currency Bonds Benchmark Survey as an essential platform that captures the shifting preferences, market sentiment, and reputational excellence of participants across the LCY bond ecosystem.

To accurately reflect the multifaceted nature of the market, the ABR survey employs a unique reciprocal voting structure. Buyside participants cast votes to recognize outstanding sell-side individuals and firms for their trade execution, client service, and research insights, while sellside professionals evaluate investors buyside firms for their portfolio innovation and market-making capabilities.

This year, the survey introduces an updated format where each voter receives five votes, allowing them to recognize multiple contributors. Furthermore, bi-weekly attribution topics have been introduced to highlight specific, highly relevant strengths. These include elements such as pricing strategy, analytical insight, and crucially, market-making during stress periods, a skill vividly demonstrated during the recent March 2026 volatility.

By participating in this survey, you directly provide actionable insights and elevate the standards of this highly competitive LCY market. Your voice carries weight in rewarding the individuals and firms who drive superior investment strategies and help in driving progress in their respective fields.

Market participants are strongly encouraged to act now: download the recently enhanced The Asset App, register and cast your votes before the survey officially closes in the first week of June 2026.

For additional inquiries, please reach out to LCY@theasset.com

To view the results from last year, please go here.

Watch a video here and learn more about the new features we have added to The Asset App to better showcase the individuals and firms who stand out in the LCY bond ecosystem.