The survey takes views of a range of asset owners, including family offices, in the Asia-Pacific region. Optimism about the region's fixed income prospects, and relative to those of other regions such as North America and Europe, is rising, it says.

A survey of 600 Asia-Pacific family offices, asset owners, asset managers, and private banks finds that they intend to put almost 46 per cent of their money into fixed income during the next 12 months, up from 37 per cent a year ago. 

APAC investors also intend to allocate 28 per cent of their fixed income investments to Asia ex-Japan in the next 12 months, an increase from 26 per cent a year ago, according to State Street Global Advisors, the asset management arm of US-headquartered State Street.

The next most important destination for fixed income allocations is Japan, which remains steady at about 16 per cent across all the time frames. Only 14 per cent and 13 per cent of their assets are invested in North American and European fixed income, respectively.

The findings are included in an ABF Pan Asia Bond Index Fund (PAIF) sponsored survey.

Although certain central banks such as the US Federal Reserve and European Central Bank have started to cut interest rates, the big hikes made after the pandemic have made bonds more attractive than hitherto as yields rose from the ultra-low rates in the 12 years after the 2008 financial crash.

"The recent cycle of interest rate hikes has revitalised the role of bonds in generating income, a function that had diminished during a decade of historically low yields prior to the US Federal Reserve's rate increase in March 2022," Marie Tsang, fixed income ETF strategist for Asia Pacific at State Street Global Advisors, said. "Apart from home bias, Asia's robust economic backdrop is boosting APAC investor sentiment. The growing allocation to Asia ex-Japan fixed income among APAC investors underscores a growing confidence in the region's fixed income markets as a source of stable returns."

When asked about which fixed income region they expect to perform best in 2024, 36 per cent of survey participants said Asia ex-Japan, followed by 15 per cent for Japan, and 14 per cent for North America. Only 9 per cent expressed optimism about Europe's bond market being a top performer.

"With inflation gradually coming under control, there is a widespread expectation of global interest rate cuts, which bodes well for the continued outperformance of many Asian bond markets. Investors are feeling more optimistic about the region compared to more mature markets," Kheng Siang Ng, Asia-Pacific head of fixed income and head of Singapore at State Street Global Advisors, said.