The Asian bond market blossomed during the financial crisis, but investors have gotten pickier as global interest rates rise.
The bond market in Asia tripled to $1.04 trillion at the end of 2014 from 2008. As banks wobbled, bond issuers stepped forward, reports the Wall Street Journal. With bonds booming, Asian debt is now higher than it was before the Asian financial crisis of the 1990s.
Is the party over? Investors know growth in Asia is slowing, and they want higher interest rates. Rajeev DeMello, head of Asian fixed income at Schroders, told the Journal that his team has recently been passing on many more bonds than in the past. Bond terms are becoming less favorable and “it’s much less straightforward than it previously was,” he said.
Investors are demanding more yield above U.S. Treasuries in exchange for holding emerging Asian bonds. In early 2015, those demands pushed the spread to as much as 6.65 percentage points, a record high, but have eased back to 5.5 percentage points. Malaysia’s state-owned oil and gas company Petronas issued $5 billion in bonds in March, with the 10-year priced to yield 3.5% — much pricier than the outstanding 10-year bonds were trading, which were trading at a yield of 2.62%.
Photo: Esparta Palma via Flickr.