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Asian foreign-currency bond issuance falls to four-year low amid Chinese developers’ woes, US rate rises
- Bonds issued in US dollars, yen and euros by Asia ex-Japan borrowers fell to lowest level since 2018
- Analysts see little hope of a recovery in the second half, with troubled Chinese developers shut out of market
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Foreign-currency bonds sold by issuers in the Asia-Pacific region (ex-Japan) will continue their decline for the rest of this year, said bankers focused on primary bond issuance.
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An absence of offerings from Chinese developers and rising US interest rates sank bond issuances in the first half of the year to the lowest level since 2018.
Issuance of bonds in the so-called G3 currencies, comprising the US dollar, the yen and the euro, declined 34 per cent year-on-year in the first six months of 2022 to US$169 billion, data from Refinitiv shows.
US dollar bonds from Chinese issuers traditionally account for half of Asia’s high-yield bond market, with the country’s embattled developers making up a significant chunk of what are known as junk bonds, or those rated below BBB- by S&P Global and Baa3 by Moody’s.
The absence of offerings from developers has dried up Chinese high-yield bond deals to a mere six this year, down from 72, and will continue to suppress total issuance for the rest of 2022, bankers said.
“I can’t see how issuance can rebound in the second half, when many Chinese issuers cannot refinance through raising bond funding, and investors’ demand for longer term papers beyond 10 years has nearly disappeared,” said David Yim, regional head of debt capital markets for Greater China and North Asia at Standard Chartered.
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