Asia dollar bond markets to lag as Trump tariffs shake up credit, bond markets

By Scott Murdoch

SYDNEY, April 9 (Reuters) - Asia's dollar bond markets are expected to remain closed for at least the next week as Treasuries sell off sharply and investors anticipate the next leg of the tariff-induced market volatility, according to bankers and advisors.

There has been no dollar issuance so far this week, bringing a pause to the strong start to the year that has been recorded across Asia, especially in China.

China deals, primarily in the big tech names, and a pick up in India issuance were expected to push Asian dollar-denominated debt deals to up to about $225 billion this year, a 20% lift on 2024.

Financing costs have soared for Asian corporates as credit spreads have widened dramatically due to market volatility caused by U.S President Donald Trump's tariffs. U.S. tariffs of up to 104% on China came into effect on Wednesday.

The temporary freezing of the dollar debt deals will make it tougher for companies to access capital from banks, which are set to exercise caution in extending credit amid the uncertain economic outlook, and from a wobbly stock market.

According to ICE BofA indexes, the spread on Asia investment grade bonds .MERADIG widened 33 basis points as of Tuesday from the end of March, while the spread on Asia high-yield corporate bonds .MERACHY widened 145 basis points as of Tuesday from the end of March.

"This week is definitely off the table for issuers, we've had several calls but no action," said one debt capital markets banker in Asia who could not be named as they were not permitted to speak to media.

"A lot of issuers have already raised money and those that didn't are now looking at the situation and thinking maybe they should have."

In Asian trading, the U.S. 10-year Treasury yield was up to 16 basis points higher and more than 50 basis points above Monday's low.

A three-day rise of nearly 60 basis points in 30-year yields, which spiked above 5%, would mark - if sustained - the heaviest selloff since 1981.

The Asian dollar bond deal freeze could remain in place until after the Easter weekend ends on April 22, and deals in Asia would be reliant on bond issuances beginning in the U.S, advisers said.

March's CPI result for the U.S. is due to be published on Thursday and the European Central Banks meeting next week would add to issuers' concerns on top of tariff volatility, advisors said.

There has been $110.2 billion worth of dollar bonds issued in Asia so far in 2025, according to Dealogic data, compared to $89.6 billion at the same time last year.

China recorded the strongest start to the year in three years with $24.7 billion worth of dollar bonds, the figures showed. There was $16.34 billion issued in the same time in 2024.

"Investors are likely able to find bonds at cheaper levels in the secondary market than what issuers may have in mind," said Christopher Li, head of BNP Paribas' Asia credit trading desk analysts.

"Before we have a meaningful recovery, primary activities are expected to stay low."