Inflation Risk Leads to Asia’s Worst Bond Returns: China Credit

China’s bonds are Asia’s worst performers for the second time in four years, reflecting concern the central bank will have to be more aggressive in raising interest rates as it seeks to rein in inflation.

Local-currency government bonds handed investors a return of 1.7 percent this year, the least among HSBC Holdings Plc indexes tracking Asia’s 10 largest economies excluding Japan. Notes in Indonesia, where borrowing costs have stayed at a record low, led regional gains for a second consecutive year in 2010 with a 19 percent advance.