Asian dollar bond issuance to revive in 2024 as investors set hope on stable interest rates
The number of dollar bond deals in Asia in 2024 is expected to rise 10% as companies start to borrow more to fund their capital projects, following a slump in the previous year. Several large companies in the region have started to issue US dollar bonds in the first few days of the year, according […]
The number of dollar bond deals in Asia in 2024 is expected to rise 10% as companies start to borrow more to fund their capital projects, following a slump in the previous year. Several large companies in the region have started to issue US dollar bonds in the first few days of the year, according to people familiar with the matter.
Indonesia has tapped the dollar funding markets to fund its three-tranche $2.05 billion bond issue, according to a Reuters report. The country’s move came as Asia Pacific’s dollar bond market continued to decline last year, with the total amount of bonds issued in the region hitting a three-year low. Companies pulled back from deals due to the rise in US interest rates.
The decline in the bond market has affected the earnings of investment banks in Asia, as their revenue from corporate buyout advisory and equity capital market activities also decreased.
The outlook for the dollar bond market is positive as the Federal Reserve is expected to start reducing its monetary policy rate in 2024.
One of the main factors that influences Asia’s dollar bond market is the lower cost of borrowing in the region. According to Elaine He, the head of debt syndicate for Asia Pacific at Morgan Stanley, the reduction in the gap between the offshore and onshore rates could encourage more dollar borrowing from the US. In 2021, Asian dollar bond deals hit record highs as various global governments and central banks started to implement emergency fiscal stimulus measures. However, the rates started to increase again in the following year.
According to Joseph Pepping, the head of Asia Pacific capital markets at Bank of America, the region’s debt issuance would increase by around 10% in 2024 due to the more stable interest rate outlook.
Despite the improving economic conditions in China, the country’s high-yield bond market still remains subdued. According to Dealogic, the country’s dollar bond issuance in 2023 was at around $42.5 billion, lower than the record of $210.5 billion set in 2019. It is also dependent on how much funding organizations need.
According to He, there is an expectation of a rise in high-yield deals in 2024 due to the Chinese economy’s size. In 2023, bonds issued in the Asia-Pacific region were valued at around $1.72 trillion, which is the lowest amount since 2015.
