Asian banks' bond issuance fell in March amid interest rate uncertainties

Asia-Pacific banks' bond issuance fell for the second straight month in March, as issuers and investors remained cautious amid interest rate uncertainties.

Banks from Singapore, Japan and China raised a total of $3.24 billion in debt in March, down from $5.91 billion in the prior month and $9.94 billion in March 2021, according to data compiled by S&P Global Market Intelligence.

United Overseas Bank Ltd.'s three-tranche, $2.1 billion nonconvertible note offering was the largest issuance in March, followed by Sumitomo Mitsui Trust Bank Ltd.'s $500 million note issuance. Both the issuances were denominated in U.S. dollars.

No equity sale was completed by an Asia-Pacific bank in March, the data show.

Lenders are preparing for higher financing costs and slower economic growth as most central banks hike rates to tame inflationary pressures. The U.S. Federal Reserve on March 16 hiked its benchmark federal funds rate by 25 basis points, and has indicated that subsequent rate hikes are expected throughout the year, with a hike as much as 50 basis points on the table for the May meeting. China's central bank is an exception, though, as it continues to cut rates and announce other easing measures such as reducing reserve requirement ratios to support economic growth.

Economic headwinds

Economic growth in Asia-Pacific is poised to slow more than previously estimated this year in the face of headwinds from the war in Ukraine, a resurgent pandemic and tightening global financial conditions, according to the IMF. The region's GDP will expand by 4.9%, 0.5 percentage points less than forecast in January and slower than last year's 6.5% growth rate, the IMF said in a blog post.

While the overall supply of bonds in the regional primary market may decline this year, some high-quality issuers in countries such as Australia and India may use windows of opportunity to raise funds to augment capital or grow their businesses.

In March, United Overseas Bank, Sumitomo Mitsui Trust Bank and China Merchants Bank's Sydney branch all issued U.S. dollar-denominated bonds, the data shows. Xiamen Rural Commercial Bank Co. Ltd.'s $237 million debt issue was denominated in Chinese yuan.

HDFC Bank Ltd., India's biggest private sector lender, and some of its peers announced plans to raise money via bonds in recent weeks to take advantage of low interest rates before they eventually move higher due to monetary tightening.