Asia Pacific dollar bond sales have surged this week, signaling what appears to be one of the busiest periods for bond issuance globally since the financial crisis. On Monday alone, at least 12 issuers announced or marketed plans to sell dollar-denominated debt, tapping favorable market conditions characterized by low yield premiums.
Among the notable names participating are Mitsubishi UFJ Financial Group Inc., China Hongqiao Group Ltd., and the Export-Import Bank of India. The timing couldn’t be more opportune, with global credit spreads hovering near levels not seen for 17 years. Investor demand for credit remains strong as borrowers aim to take advantage of this moment before potential shifts occur.
“We’re pretty positive on Asian high yield, Asian credit as a whole,” stated Navin Saigal, head of fundamental fixed income at BlackRock Inc. He pointed out the current environment where investors can expect yields of approximately 6-7% on dollar bonds, alongside restrained supply compared to historical highs.
The rush this week follows the conclusion of what was already a significant year for Asia Pacific dollar bond sales, with total annual sales climbing by 21% to around $278 billion, according to Bloomberg data. Despite the encouraging growth, total issuance remains about 33% below the five-year average of roughly $420 billion recorded between 2017 and 2021, primarily impacted by defaults among Chinese property developers.
Notably, the last year saw Chinese issuers reclaiming the top position as the largest group of borrowers by risk country for dollar bonds, surpassing Japan. This change is indicative of restored confidence and potential for future issuance, as investors closely watch the developments.
On Monday, interest was not limited to dollar bond sales. Local-currency bond markets also showcased activity, including the Hong Kong Airport Authority, which mandated for the potential sale of yuan and Hong Kong dollar-denominated notes. The Commonwealth Bank of Australia successfully priced A$3 billion (approximately $1.9 billion) worth of five-year notes, indicating healthy market participation across currencies.
Some analysts foresee the current month potentially eclipsing January of last year, which saw record-breaking bond issuance exceeding $720 billion. With the anticipated swearing-in of President-elect Donald Trump on January 20, issuers are acutely aware of the geopolitical climate and the potential volatility it may introduce to credit markets.
Pilar Gomez-Bravo, co-chief investment officer of fixed income at MFS Investment Management, cautioned, “If Trump focuses on tariffs and immigration…that’s a really difficult picture for EM debt.” This outlook suggests the possibility of extended higher interest rates and greater dollar strength, both unfavorable scenarios for the region's debt markets.
With the backdrop of dollar bond spreads following their U.S. counterparts lower, driven by Chinese stimulus efforts and acceleration of rate cuts by regional central banks, there is considerable optimism. Preliminary reports indicate U.S. high-grade bond issuance may reach about $50 billion this week alone.
The appetite shown by Asia Pacific borrowers for dollar bonds highlights their strategic planning where they seek to secure funding before any significant geopolitical realignment or economic turbulence could arise.
The day’s developments pointed to not just resilience but potential for recovery as Asia’s credit markets continue progressively through the early months of 2025. While optimism prevails, analysts maintain caution as global investors attune themselves to the impending shifts driven by new U.S. policies and their possible ramifications on Asian market attractiveness moving forward.