Issuers from across the Asia-Pacific region have crowded into the US dollar bond market, marking one of the busiest waves of issuance in the area this year. With the possibility of higher interest rates looming, global corporations are moving swiftly to absorb investor capital before conditions shift. According to sources familiar with the matter, more than ten borrowers in the region are queuing up to launch transactions, including Japan's largest bank, Mitsubishi UFJ Financial Group, which is seeking to sell $3.5 billion in debt.
Meanwhile, Japanese peer Mizuho Financial Group, Commonwealth Bank of Australia, and Malayan Banking Bhd are also among the lenders looking to raise funds, while medical equipment maker Olympus Corp has already hired banks to prepare for a potential bond sale. This wave of issuance underscores how eager borrowers are to take advantage of a rare combination of tightening credit spreads, resilient investor demand, and relatively calm markets, even as investors weigh the likelihood of a US rate hike later this month. US inflation data is set to be released this Friday, and Federal Reserve officials have indicated that the figures will be critical in determining whether a hike is necessary.
Where to begin
"As US rates may stay higher for longer, issuers could accelerate their funding timelines," noted Zerlina Zeng, Asia credit strategy head at CreditSights in Singapore. "Credit spreads remain tight, and market sentiment stays robust." The flurry of fundraising activity is expected to gain even more momentum. Dealers anticipate that issuance in the US high-grade market alone could reach around $70 billion this week, fueled by bond sales tied to investments in artificial intelligence. Credit spreads are currently hovering near multi-decade lows, though they have started to widen in recent weeks as investors prepare for a post-summer surge in supply.
For investors, the ability to lock in all-in yields of roughly 5.5% on average for higher-rated dollar corporate debt remains attractive enough to offset the risks that sticky inflation or Middle East conflicts could erode strong corporate profits. US hyperscale cloud providers, such as Alphabet Inc, are increasingly turning to global bond markets to fund capital expenditures that could reach $6 trillion by 2030, according to industry research. "Companies are actively leveraging the bond market to raise capital for data center construction, infrastructure, and computing capacity," said Xixi Sun, head of Greater China debt syndicate at Citigroup Inc. "This demand has pushed global corporate bond issuance to record levels, and we are seeing it play out in the US, Europe, and across Asia alike."