Asia Pacific international fixed income issuance is off to a record start, comprising a quarter of global volume in January.
Are we back to the days of «equities in Dallas»? Although it is a bit premature to hint at a return to the heady bond market conditions in Michael Lewis’ Liar’s Poker, something is clearly going on.
With stock markets behaving much like a Schrodinger cat thought experiment (up when you look, down when you don’t), fixed-income yields have been steadily rising in the background on higher interest rates.
That is now leading to higher levels of new international bond issues in the Asia Pacific, something that was confirmed Wednesday in an email sent by US-based bank Citi.
Record Start
It cited data from Dealogic indicating record Asia Pacific volumes in the year-to-date (speak the last one and half weeks), with new issues totaling $40.8 billion, an increase of 30 percent from a year earlier.
Moreover, the institution added that regional issuance comprised exactly a quarter of all new debt notes worldwide – a level that is also at an all-time high.
Beyond that, Citi relayed it had helped clients with $15 billion of new issues in the sovereign, corporate, and FIG sectors.
Swiss Recover Ground
Although the major Swiss banks had a lackluster back end to 2022 in the fixed income space (see link above), at least UBS seems to have started the new year by making up some lost ground.
Indeed, UBS co-head of debt capital markets for Asia and head of Asia debt syndicate Terry Schmassmann confirmed the buoyant fixed income environment to finews.asia in a telephone conversation.
“For investment-grade offerings, it is a record year for sure. In Asia, what has been interesting is that we have been seeing much larger and broader order books than before, which showcases that wide-ranging confidence in fixed-income markets has returned,” he said.
Along with several other international banks, Switzerland’s largest bank had a coordinating role in the heavily oversold US $3 billion bond issued by Hong Kong’s airport authority last Friday.
A day earlier, it acted as a joint lead manager and joint book-runner in the US dollar and euro tranches of the Hong Kong Monetary Authority's (HKMA) $7.5 billion green bond issue, which was also significantly oversubscribed.
Buoyant Outlook
Many of the banks are currently positive on the bond outlook for the remainder of the year as well.
Schroders indicated in one of its regular talking points delivered early last week that bond valuations look attractive, with yields being a great deal higher than they were a year ago.
«We have no doubt that these factors will open up interesting opportunities across global fixed-income markets,» according to the report penned by fixed income and currency head Paul Grainger and fixed income strategist James Bilson.
Range of Possibilities
Pictet Wealth Management reiterated in its 2023 investment outlook a belief that interest in bonds will continue to grow.
«The rise in real yields is offering a new range of possibilities in government bonds and credits alike,» the report said.
It appears that bonds are in again, as US brokerage Charles Schwab maintained at the end of the last year in an apt cartoon.
Bumpy Ride
Still, with that being said, Schwab indicated a «bumpy ride» ahead given tighter monetary policy, volatile global economic developments, and continued political uncertainty.
«Despite these challenges, we see opportunities in 2023 for the bond market to provide investors with attractive yields at lower risk than we've seen for several years,» the brokerage indicated.
