Lock in prices before interest rate hikes! On the eve of the Federal Reserve's interest rate decision, Asian and Pacific borrowers flocked to sell dollar bonds

The Zhitong Finance App noticed that on Tuesday, borrowers from all over the Asia-Pacific region crowded out the US dollar bond market, setting off one of the busiest issuance waves in the region this year. As interest rates are likely to rise further, global companies are preparing to fully absorb investors' capital.

People familiar with the matter revealed that more than 10 issuers in the region are lining up to prepare a deal, including Japan's largest bank Mitsubishi UFJ Financial Group, which is seeking to sell $3.5 billion in debt.

Lenders such as Japanese counterpart Mizuho Financial Group, Commonwealth Bank of Australia, and Maybank are also seeking financing, while medical device manufacturer Olympus has hired banks to prepare for a potential bond issue.

This wave of issuance highlights that in the context of investors evaluating the possibility of the Federal Reserve's interest rate hike later this month, issuers are anxious to take advantage of the rare combination of tightening credit spreads, resilient investor demand, and a relatively calm market. The latest US inflation data will be released this Friday. Federal Reserve officials have hinted that this data is critical to deciding whether to raise interest rates.

Zerlina Zeng, head of Asian strategy at CreditSights in Singapore, said: “As US interest rates are likely to remain high for a longer period of time, issuers may accelerate” financing. “Credit spreads are still narrowing, and market sentiment remains strong.”

This wave of financing will further accelerate. Traders expect that as investment in artificial intelligence (AI) drives bond sales, the US high-rated market will issue around $70 billion this week alone. Credit spreads are currently hovering near decades-long lows, but they have begun to widen in recent weeks as investors prepare for the peak of post-summer issuance.

For investors, they can still lock the all-inclusive yield on higher-rated US dollar corporate bonds at an average of around 5.5%. For some investors, this is enough to offset the risk that sticky inflation and the Middle East conflict may erode strong corporate profits.

According to industry research data, US supercloud vendors such as Alphabet are increasingly turning to the global bond market to fund capital expenditure that could reach $6 trillion by 2030.

Xixi Sun, head of debt underwriting at Citigroup Greater China, said, “Companies are actively using the bond market to finance data center construction, infrastructure, and computing power. This demand has pushed global corporate bond issuance to record levels. We're seeing this unfold in America, Europe, and all of Asia.”