Asia Junk Debt Demand Soars by Most This Year on Trade Bets

(Bloomberg) -- Investors are gorging on riskier dollar bonds in Asia amid a resurgent appetite for risk as U.S. and China inch closer to a trade deal.

Orders for junk dollar notes in the region outside Japan surged to 5.5 times their issuance sizes in October, the highest month this year, according to Bloomberg-compiled data. Progress on the trade talks has sent bond spreads sliding as much as 20 basis points from their recent peak in September. Bank of Singapore Ltd. sees no let up in demand anytime soon.

“As long as trade tensions do not get any worse, we believe that demand will remain vigorous for the Asian high-yield credit asset class going into year-end,” said Todd Schubert, head of fixed-income research at Bank of Singapore.

The buoyant market mood has already prompted a slew of Chinese builders to line up for funds at the start of November. Developers have led Asian high-yield borrowers to sell a record $95 billion of dollar notes so far this year, Bloomberg data show.

Non-China or non-mainland property deals would be “especially well received given asset managers’ desire for diversification at both the country and industry level,” said Bank of Singapore’s Schubert.

Read also: China Developers Flock to Sell Dollar Bonds

The overall demand for dollar bonds sold last month reached 4.8 times, an eight-month high, according to Bloomberg data.

“Investor demand for credit has kicked up a gear in October, helped by satisfactory corporate earnings, the Fed’s resumption of T-Bill purchases, and signs of progress in trade and Brexit negotiations,“ said Mark Reade, head of fixed-income research at Mizuho Securities Asia.

CITIC Securities Co. topped investors’ wish list in October, with its $200 million five-year note getting 10.5 times covered. Chemical company Shanghai Huayi (Group) Co. followed with its $350 million bonds garnering over $3.4 billion of orders.

--With assistance from Shawn Qiu.

To contact the reporter on this story: Annie Lee in Hong Kong at olee42@bloomberg.net

To contact the editors responsible for this story: Neha D'silva at ndsilva1@bloomberg.net, Chan Tien Hin

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