Deutsche Bank-Asia Macro Strategy Notes Introducing DB RichCheap Monitor...-118819382

T2se3r0Ot6kwoPaT2se3r0Ot6kwoPaDistributed on: 11/11/2025 23:56:19 GMTDistributed on: 11/11/2025 23:56:19 GMT12 November 2025Deutsche BankResearch Asia Fixed Income Asia Macro Strategy Notes Date Introducing DB Rich/Cheap Monitor for Asia local bondsTo understand the relative value in Asia local currency government bonds, we have developed a rich/cheap monitor based on the Nelson-Siegel-Svensson (NSS) model. This systematic monitor seeks to provide actionable insights into bond valuations, helping make informed investment decisions.The NSS model fits a smooth, continuous yield curve on a universe of observed cash bond yields. This serves as a critical mechanism for eliminating noise attributable to individual bond idiosyncrasies, thereby establishing a robust "fair pricing" benchmark. We can then determine richness or cheapness of an individual bond based on whether its yield falls short or surpasses the NSS 'fair' yield. We note that deviations from the NSS model do not always signify a market dislocation. Rather, these discrepancies can arise from legitimate factors such as divergent liquidity conditions (e.g., highly liquid on-the-run bonds frequently exhibit lower yields compared with off-the-run bonds of equivalent maturity), specific investor demand (e.g., 10Y FAR IGBs demonstrate substantially lower yields than non-FAR IGBs of the same maturity), or variations in tax treatment (e.g., CGBs issued following the August 2025 tax regulation change typically carry higher yields than those issued prior).Our NSS model-based monitor incorporates several key features to enhance its accuracy, relevance, and usability;nData sourcing. We utilize Bloomberg as our primary data source, capturing essential information such as cash bond pricing, maturity dates, outstanding sizes, and bid/ask spreads. This transparent data sourcing ensures our analysis is both replicable and verifiable.nDefining the bond universe. We use a tightly defined bond universe with the help of several exclusion criteria. Bonds are excluded if their outstanding amount is below $2bn (or $1bn for RPGBs); if they exhibit poor liquidity (e.g., excessively wide bid/ask spreads or infrequent trading activity); or if they were issued more than 10 years ago.1 This approach guarantees that our fitted yield curve is based on actively traded and highly representative bonds.1 The exception is China, where we filter out bonds older than three years due to the extensive annual bond issuance.Bryant XuStrategist+65-6423 5558Jalaj SinghResearch AssociateSameer GoelMacro Strategist+65-642-36973Perry KojodjojoStrategist+852-2203 6153Vaninder Singh, CFAMacro Strategist+65-6423 8947Joey ChungStrategist+65-6423 8298Hazel LaiMacro Strategist+852-2203-6150Deutsche Bank AG/SingaporeIMPORTANT RESEARCH DISCLOSURES AND ANALYST CERTIFICATIONS LOCATED IN APPENDIX 1. UNTIL 19th MARCH 2021 INCOMPLETE DISCLOSURE INFORMATION MAY HAVE BEEN DISPLAYED, PLEASE SEE APPENDIX 1 FOR FURTHER DETAILS.12 November 2025