23-07-2025
Asian local-currency bond sales reach record on risks to US dollar
[CHICAGO] US President Donald Trump's unpredictable policy moves are driving investor demand for Asian local-currency bonds, spurring fresh interest in the region.
Companies and non-sovereign issuers in Asia-Pacific have sold about US$1.5 trillion in bonds so far in 2025 in the region's currencies, a 6 per cent rise and a record for this period, according to data compiled by Bloomberg. Offerings in the three months from April to June were the highest for any quarter.
'We are definitely seeing more buyers of local-currency Asian bonds than in pre-April,' said Daniel Tan, a portfolio manager at Grasshopper Asset Management. 'There are large inflows from pension and sovereign wealth funds looking to diversify away from US dollar assets.'
Momentum picked up after Apr 2, when Trump stunned markets by announcing higher tariffs on allies and rivals, only to roll them back days later after stocks slid and bond yields surged. While risk assets rebounded, credit investors have been hedging against tariff-related volatility and a weakening US dollar by shifting to less-exposed regions.
The shift is reflected in performance: the Bloomberg Asia-Pacific Aggregate index, which tracks a wide range of bonds in local currencies, has gained 3.9 per cent this year, outpacing a 3.5 per cent return from its US counterpart.
'Diversification into broader Asian local currency markets is likely to accelerate,' said Angus Hui, deputy chief investment officer and head of fixed income at Fullerton Fund Management in Singapore. The de-dollarisation trend is putting the spotlight on local-currency credit, particularly in markets with AAA sovereign ratings such as Australia and Singapore, he said.
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Once niche, Asia's bond markets are drawing investors thanks to stronger local economies. Indian companies raised a record 6.6 trillion rupees (S$98 billion) through local-currency notes in the first half of 2025, up 29 per cent from the year prior, according to data compiled by Bloomberg.
In China, where over US$1 trillion in bonds have been issued in the local currency this year, declining borrowing costs have made financing more attractive to domestic firms.
'The importance of thinking about the US dollar in your portfolio grows the further you are from the US and the further your liabilities are from US dollars,' said Navin Saigal, head of fundamental fixed income for Asia-Pacific at BlackRock.
Saigal said tariff policies have widened the gap between the region and the US, a divergence also reflected in fiscal conditions.
Australia is a prime example. It holds AAA ratings from S&P Global Ratings, Fitch Ratings, and Moody's Ratings. In contrast, the US has lost the top credit score from all three agencies, due to rising debt-servicing costs.
'No one in the world is talking about the fiscal viability of Australia,' said Oliver Holt, head of debt syndicate and IG origination for Asia ex-Japan at Nomura Holdings, one of the biggest managers of Aussie-denominated bond sales by foreign issuers. It probably makes sense for investors to put some money into other places if there's an assumption that the US dollar is going to weaken, he said.
Meanwhile, US dollar bond issuance from Asia is recovering from a slump caused by record defaults from Chinese property developers.
Fuelled in part by M&A activity, Japanese companies have led this year, with US dollar bond sales from the Apac region up about a third to more than US$215 billion so far this year, according to data compiled by Bloomberg. That is still well off the highs seen in past years.
But unexpectedly, Apac borrowers are tapping Europe's debt market at an unprecedented pace in 2025. Euro bond issuance is running at more than 49 billion euros (S$74 billion) year to date and has already topped last year's full-year total, according to data compiled by Bloomberg.
'It's not that everyone's now selling US investment-grade or Apac US dollar investment-grade bonds,' said Owen Gallimore, Apac head of credit analysis at Deutsche Bank. But 'Asian-based investors want their issuers to come to market more often in euros, offshore yuan, or other currencies', he added. BLOOMBERG
