Bond sales by Asian banks fall to lowest in a year as China remain on sidelines

Janice Lim

Published Wed, Mar 30, 2022 · 03:41 AM

THE level of bond sales by Asia-Pacific banks has fallen to its lowest in at least a year in February, as lenders from the region's major economies, notably China, stayed on the sidelines due to uncertainties over interest-rate trends, said S&P Global on Mar 25.

According to data compiled by the market intelligence company, analysts McDowell Ramintas, John Wu and Rehan Ahmad said that banks from the world's second largest economy, which is facing a troubled property market, were less active issuing bonds in the first 2 months of this year, dragging down total bond issuances by Asia-Pacific banks.

In February, only 2 Japanese banks - Mizuho Financial Group and Japan Bank for International Cooperation - issued bonds worth US$3.1 billion, which is 218.7 per cent less than the US$9.9 billion raised in January.

Compared to the US$15.1 billion worth of bonds issued in February last year, bond sales declined 388.3 per cent.

Chinese banks may regain some momentum in issuing debt in the second quarter of this year when they are more confident about the interest-rate trend, said Bruce Pang, Hong Kong-based head of macro strategy research for China Renaissance Securities.

In addition, "potential loan growth, which will increase the need for low cost capital to keep interest spread stable, could be another probable driver to get Chinese banks back in action," Pang said.

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Unlike many major central banks, including the Federal Reserve in the US, the People's Bank of China had indicated its intent to pursue a more accommodative monetary policy. This includes cutting rates to prop up the country's slowing economic growth.

It has cut banks' reserve requirement ratios and benchmark interest rates, or loan prime rates, among other measures, since late last year.

Market expectations for the People's Bank of China to cut interest rates in April have increased, after it did not materialise in March, which was a move widely expected by analysts.

At China's annual parliamentary meetings, regulators reiterated the need to maintain macro leverage stability. While this could constrain banks' bond issuances, gradual relaxations on the property sector could boost loan demand, said Pang.

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