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Record $100 Billion Asian Junk Bonds Got Funds Wanting More

Finbarr Flynn
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Record $100 Billion Asian Junk Bonds Got Funds Wanting More

(Bloomberg) -- Sales of Asian junk dollar bonds have topped $100 billion for the first time ever in a calendar year and investors just can’t get enough of it.

Corporate debt markets are on fire globally as central banks have kept rates near record lows. Speculative-grade Asian issuance so far this year is running at double last year’s full-year total of about $50 billion, data compiled by Bloomberg show.

Goldman Sachs Group Inc. has warned that investors should avoid the riskiest part of the market. High-yield dollar bonds have handed investors close to 13% of returns so far in 2019, after a series of rate cuts by the Federal Reserve accelerated the hunt for yield and China adopted credit-easing measures.

Australia & New Zealand Banking Group Ltd. sees potential for junk bond sales to increase as borrowers refinance maturing debt and Chinese issuers, the single biggest source of notes in the region, continue to have liquidity pressures, according to Owen Gallimore, Singapore-based head of credit strategy.

Not everyone agrees, though, on the issuance outlook for the market, with Morgan Stanley this month forecasting a drop for junk corporate bond deals in 2020, citing regulatory constraints on bond sales from Chinese high-yield property companies.

ANZ’s Gallimore expects spreads between Asian high-yield and investment-grade bonds peers to stay high in 2020, given a weak macro-economic backdrop, supply and news such as commodities trader Tewoo Group Corp.’s debt restructuring.

(Updates figures in chart.)

To contact the reporter on this story: Finbarr Flynn in Tokyo at fflynn3@bloomberg.net

To contact the editors responsible for this story: Andrew Monahan at amonahan@bloomberg.net, Beth Thomas, Denise Wee

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