Taiwan’s corporate bond issuance this year has hit a seven-year low, as companies scale back offerings on expectations that local interest rates have peaked and could move lower.
Taiwanese companies issued US$533 million of New Taiwan dollar bonds last month, a third of the total a year earlier, Bloomberg-compiled data shows. Total issuance from January to last month fell to US$9.02 billion, the lowest level since 2017.
Those numbers do not include life insurers, which have issued a record number of subordinated bonds to meet capital requirements and have attracted buyers with the notes’ higher-than-average yields.
Photo: Wu Chia-ing, Taipei Times
The broader slowdown contrasts with the bond market bonanza seen in most of the rest of Asia, where issuance has surged on increasing appetite for yield. Taiwan’s interest rates sit at a 16-year high of 2 percent, making nonfinancial firms reluctant to issue bonds.
“Companies take account of global market conditions when making capital and cost allocations,” Hua Nan Securities (華南永昌證券) fixed income trader Sam Chang said.
As the Federal Reserve and other central banks start looking toward policy easing, companies are waiting to see if those decisions would also influence Taiwan, he added.
Also potentially denting investor demand are the subordinated bonds issued by insurers.
Domestic bond investors have allocated a lot of capacity to bonds issued by Taiwanese life insurers, so that could also have some implications on demand, Taiwan Ratings Corp (中華信評) senior director Andy Chang (張書評) said.
With the timing of any rate cut in Taiwan uncertain, some companies are seeking out alternative funding routes, such as bank loans and commercial paper.
Commercial paper issued by Taiwanese companies rose 15 percent in the first six months of the year to NT$10.4 trillion (US$317 billion), compared with the same period last year, central bank data showed.
“For bank loans, large corporates have nice bargaining power as the banking environment is quite competitive,” Andy Chang said.
Commercial paper comes in shorter tenors, providing cheaper costs under the current yield curve, he added.
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