Asian bond issuers rush to market as Iran hopes tighten spreads

[HONG KONG] Asia’s US dollar bond market has seen a burst of issuance as companies and governments rushed to secure cheaper funding, with credit spreads tightening to record lows on hopes tensions in the Middle East may ease.

Hong Kong’s government is marketing a US dollar benchmark offering as part of a broader multi-currency sale on Thursday (May 7), while HSBC Holdings is pricing a two-part US dollar offering in the busiest session in more than two weeks. The sales follow Westpac Banking’s US$4 billion multi-tranche deal a day earlier, highlighting a strong reopening of primary markets.

Yield premiums on the region’s high-grade debt tightened by at least one basis point to an all-time low, according to traders.

The credit rally mirrors a broader rebound in regional risk assets as optimism grows over a potential US-Iran deal, with a key Asia-Pacific equity benchmark climbing to a record on Thursday. The gains highlight a rising confidence in the region’s corporate balance sheets and reinforces expectations for sustained demand in Asia’s primary debt market.

“We see this primarily as a reflection of resilient economic and corporate fundamentals across much of Asia,” said John Woods, chief investment officer and head of investment solutions for Asia at Lombard Odier. “Many issuers have refinanced successfully at lower rates, and earnings have held up better than feared amid the geopolitical noise.”

Asian credit spreads have tightened about 13 basis points this quarter, outperforming a roughly five basis-point decline globally, according to Bloomberg indexes. Sentiment has also been buoyed by stronger earnings, particularly in Japan, fuelling the gain in regional equities led by technology shares.

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“Asian economies’ fundamentals have been comparatively stronger than expected, and earnings results so far have been quite supportive,” Marcella Chow, a global market strategist at JPMorgan Asset Management, said in a Bloomberg TV interview, adding that improved balance sheets and resilient cash flows have helped lift confidence. BLOOMBERG