HONG KONG: Borrowers in the Asia-Pacific are slowing deals in the US dollar bond market, with the highest yields in more than two years sapping deal momentum.
No issuer from the region has sold a bond in the US currency so far this month in the syndicated market, and debt sales in the third quarter (3Q) slumped 10% to about US$88bil, according to Bloomberg data.
A recent global sell-off in government bonds has made it harder for companies across regions to proceed with deals.
The Asian market has had fewer offerings tied to the artificial intelligence (AI) boom, which has driven issuance in the United States.
Alphabet Inc and Amazon.com Inc each priced offerings of US$25bil in their home market in the third quarter, the latest in a spree of such jumbo fundraisers.
Bankers and investors in Asia expect deal volumes in the fourth quarter to be flat or down compared with the same period in 2025, when they were about US$40bil, after yields on the region’s dollar notes touched 6.1% earlier this week, the highest since 2024.
Concern about the impact from sustained higher yields on company earnings is also starting to disrupt the relative calm in secondary credit markets globally, with spreads widening to their most since April earlier this month, the data showed.
“It’s only folks that have must-do financing that will come to market,” said Dhruv Saigal, head of Asia bond syndicate at Barclays in an interview.
“If borrowers have time on their hands, you would want to see rates and market conditions stabilise.”
Japanese issuers accounted for almost 40% of dollar-denominated bonds sold from Asia-Pacific in 3Q, according to data compiled by Bloomberg.
Indian and South Korean issuers ranked second and third, accounting for 16% and 15% of the volume, respectively.
Deals from mainland China, once the mainstay of the market before its housing market meltdown, slumped to fifth place at just under 7%, the data showed.
“A lot of the pick-up in supply in Japan we have seen is because of onshore rates spiking to historically high levels after being quite low,” said Barclays’ Saigal, who also cited a pick-up in investment by the nation’s firms.
The average yield on yen-denominated corporate notes is hovering near its highest in more than a quarter of a century at about 2.8%.
That means for some issuers it is possible to raise funds in the dollar market, with little or no extra cost after the proceeds are swapped back to the Japanese currency.
One of the few large AI-related this year from Asia was SoftBank Group Corp’s US$10bil fundraising in the greenback last month.
Together with €1bil (US$1.1bil) of notes sold in the common currency, that deal was a record size for the junk bond market.
In Asia, the syndicated loan market has been the primary source of funding for the AI boom, accounting for US$32.6bil of deals linked to data centres so far this year, according to Bloomberg-compiled data, topping 2025’s total of US$21.5bil.
Loans to buy advanced computer chips that will power data centres are also becoming a growing focus for banks and private credit lenders in the region.
Apart from loans, many borrowers from Asia, particularly, in China, can turn to cheaper onshore bond funding versus the dollar. Top-rated Chinese companies can currently sell local-currency bonds at yields of under 1.8% for tenors of seven years or shorter, Chinabond indexes showed.
For now, the use of the dollar bond market in the region to fund data centres has yet to take off, but there are signs of change.
“We are seeing a bit more interest coming to the bond market from data centre companies,” said Sheldon Chan, a portfolio manager for Asian and Emerging market credit at T. Rowe Price Group. — Bloomberg
