ASIFMA Asia Credit Report, Fourth Quarter 2013

Besides being a most eventful year with several ups and downs, 2013 has nonetheless turned out to be yet another record year for Asia ex-Japan G3 bond issuance. With total is-suance this year currently at USD 141.40 billion (bn) (as of December 31, 2013), this figure is ahead of full year (FY) 2012 issuance numbers of USD 134.04bn (inclusive of high grade (HG), high yield (HY), and unrated deals) and a new high in G3 issuance. The key driver of issuance through much of 2013 centered on the timing of tapering of the the Fed’s purchase of US Treasuries, something that was first flagged mid-year and was immediately accompanied by both a sharp fall in emerging market (EM) currencies and equities and, more significantly for the credit universe, by a sharp backup in US treasury yields.

However, the surprise decision of the US Federal Reserve (Fed) not to institute the much heralded taper in September resulted in a drop Asia ex-Japan G3 bond issuance in Q3 (USD 23.60bn, a 44.8% decline quarter-over-quarter), only to pick up again in Q4 with USD 29.07bn in deals priced. However, in a somewhat paradoxical twist, the actual tapering an-nouncement was greeted much more favorably by the markets, which reacted very positively to the announcement of the reduction in monthly bond purchases by the Fed to USD 75bn from USD 85bn in the waning days of 2013.

With markets adopting a “risk-on” posture, deal flow has started 2014 on a very constructive note, as spreads continue to tighten (although total returns continue to be muted, on account of US Treasury weakness). Additionally, tentative signs of a bottoming out in the Chinese economy (despite concerns around the country’s shadow banking system and mixed signals with respect to Chinese manufacturing indices), coupled with the continued emphasis on economic reforms agreed at the third Chinese plenum, has also helped underpin Asian credit market sentiment.

About the Report

Done in partnership with ASIFMA, the Asia Credit Report is a quarterly report on the trends and statistics of the Asian bond market. Additional statistics on the G3 and CNH fixed income markets are also included.

For more information on ASIFMA’s efforts in Asian fixed income, please visit ASIFMA.

Credits

ASIFMA

  • Executive Director, Fixed Income: Vijay Chander

SIFMA Research

  • Managing Director, Head of Research: Kyle Brandon
  • AVP: Sharon Sung