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Record $300 Billion of Asian Bond Sales Stirs Debate on Returns

Finbarr Flynn and Annie Lee
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Record $300 Billion of Asian Bond Sales Stirs Debate on Returns

(Bloomberg) -- Asian dollar bond sales have jumped to a record of almost $300 billion this year, the kind of unprecedented supply that can start to make investors feel a bit queasy.

But money managers may avoid such indigestion, as signs suggest a slowdown in offerings ahead that would help keep returns attractive, some argue.

The market has been red hot this year, with global central banks cutting rates and the hunt for yield accelerating. Issuance in the region excluding Japan is running at $299 billion, the most for similar periods in previous years, with several borrowers kicking off roadshows on Monday for potential new deals. The debt has returned the most in five years in 2019, at about 11%.

Analysts at JPMorgan Chase & Co. expect supply to be lower next year in part because of pre-funding in 2019 and more stringent Chinese regulation of debt sales by local property developers, the biggest source of high-yield dollar notes in the region.

Morgan Stanley upgraded its recommendation on Chinese high-yield property bonds to overweight, citing an expectation for lower issuance in 2020, and inflows skewed to the lower-rated Asian notes, according to a report.

“Our global economics team is expecting trade tensions and monetary policy to ease concurrently for the first time in seven quarters, lifting global growth” in the first quarter of 2020 and onwards, Kelvin Pang, a credit strategist at Morgan Stanley in Hong Kong, wrote in the report.

Goldman Sachs Group Inc. likes Asian high-yield dollar bonds, based on the view that global growth will be stable and assuming there’s no escalation of trade tensions.

To contact the reporters on this story: Finbarr Flynn in Tokyo at fflynn3@bloomberg.net;Annie Lee in Hong Kong at olee42@bloomberg.net

To contact the editors responsible for this story: Andrew Monahan at amonahan@bloomberg.net, ;Neha D'silva at ndsilva1@bloomberg.net, Ken McCallum

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