Asia-Pacific dollar bond sales surged to a nine-month high this week, as companies and governments lock in historically tight spreads before they climb further.

Japanese borrowers including Takeda Pharmaceutical Co and Nomura Holdings Inc are poised to add on Thursday to almost US$14 billion of deals priced so far this week. The total is already the most for any week since September of last year, according to data compiled by Bloomberg.

Yield premiums on the region’s high-grade dollar bonds have ticked up in the last month, but are still near their historically-low levels. This week’s activities underscore borrowers’ reluctance to wait to issue new bonds, given the recent trend of premiums heading back up. 

The US high-grade market is seeing one of its busiest-ever years, with issuance up 23% on-year so far in 2024 to US$859 billion. The recent spurt from Asia is adding to the momentum in a market that, until June, had been in decline for a third consecutive year. Investors have shown strong demand for the raft of deals with some - such as one by state-backed bad debt manager China Great Wall Asset Management Co - recently being more than seven times subscribed.  

“We are seeing an encouraging return to growth for Apac offshore primary markets, with some forgotten secular growth trends reemerging,” said Owen Gallimore, Apac head of credit analysis at Deutsche Bank AG. Governments and conglomerates’ ambitious growth plans and pent-up dollar needs stemming from a low base of previous borrowing are helping to drive the rush, he said.

The flurry of recent activity stands in contrast to the Asian primary dollar bond market’s weakness in recent years as borrowers, led by those in China, often switched to cheaper local-currency funding. In the near-term, the strong dollar would be a disincentive for some issuers in the region that don’t have urgent needs to borrow in the US currency and want to avoid higher debt-servicing costs. 

The rapid pace of deals on consecutive days is reminiscent in some ways of the market’s peak several years ago, when Chinese borrowers dominated before the nation’s property crisis. But this week’s rush is being led by non-Chinese issuers, with Japanese companies accounting for close to 30% of the deals priced so far. Many of the Japanese firms that raised funds in the dollar have sizable overseas businesses where the proceeds could be used. 

Other Japanese companies poised to price dollar notes on Thursday are SoftBank Group Corp and Mizuho Financial Group Inc. 

  - Bloomberg