Locking in prices ahead of interest rate hikes! On the eve of the Federal Reserve rate decision, Asia-Pacific borrowers rush to issue US dollar bonds

According to Zhihui Finance APP, on Tuesday, borrowers from across the Asia-Pacific flocked to the US dollar bond market, setting off one of the busiest issuance waves in the region this year. With interest rates possibly heading even higher, global companies are preparing to draw in investor funds as much as possible.

According to informed sources, more than 10 issuers in the region are lined up for transactions, including Japan’s largest bank, Mitsubishi UFJ Financial Group, which is seeking to sell $3.5 billion in debt.

Other lenders such as its Japanese peer Mizuho Financial Group, Commonwealth Bank of Australia, and Maybank are also seeking financing, while medical device manufacturer Olympus has appointed banks to prepare for a potential bond issuance.

This wave of issuance highlights that, as investors assess the possibility of a Federal Reserve rate hike later this month, issuers are rushing to take advantage of the rare combination of tightening credit spreads, resilient investor demand, and relative market calm. The latest US inflation data will be released this Friday, and Federal Reserve officials have indicated that these figures are crucial for deciding whether to raise rates.

Zerlina Zeng, Head of Asia Strategy at CreditSights in Singapore, said: “With US interest rates likely to remain high for longer, issuers may accelerate their fundraising.” “Credit spreads are still narrowing and market sentiment remains strong.”

This series of fundraising waves is expected to speed up further. Dealers expect that, as investment in artificial intelligence (AI) drives bond sales, US high-grade markets alone could see issuance hit about $70 billion this week. Credit spreads are currently lingering near multi-decade lows, but as investors prepare for a post-summer issuance peak, spreads have already begun to widen in recent weeks.

For investors, they can still lock in an all-in yield of around 5.5% on higher-rated US dollar corporate bonds, which for some is enough to offset the risks that sticky inflation and Middle East conflicts could erode strong corporate profits.

According to industry research, US hyperscale cloud providers such as Alphabet are increasingly turning to global bond markets to fund what could reach $6 trillion in capital expenditures by 2030.

Xixi Sun, Head of Debt Underwriting, Greater China at Citigroup, said: “Companies are actively using the bond market to fund data center construction, infrastructure and computing power. This demand has pushed global corporate bond issuance to record highs. We are seeing this play out in the US, Europe, and across Asia.”