Asia dollar debt issuance rises despite tariffs and trade war concerns

By Scott Murdoch

SYDNEY, July 10 (Reuters) - Asia dollar bond issuance has recorded the strongest start to a year in four years, as the prospect of a global trade war due to U.S. tariffs failed to slow down debt deals in the region.

There was $177.4 billion worth of dollar-denominated transactions across Asia Pacific, not including Japan, in the first six months of 2025, according to LSEG.

That was a 25% increase on the $141.8 billion recorded in the first half of 2024 and dealmakers hope forecast interest rate cuts in the U.S. will help push issuance even higher in the second half.

The surge in issuance comes despite fears of a "de-dollarisation" theme emerging across the world after U.S. President Donald Trump's tariff announcement on April 2.

"The Asian issuance market is still really ripping," said Andrew Chan, head of the Asia ex-Japan bond syndicate at Goldman Sachs.

"Investors are flush with liquidity and eager to deploy into high-quality names they know and trust, especially when new spreads come in line with or even inside of secondaries."

Credit spreads, which are the premium paid by companies over U.S. Treasuries - traditionally perceived to be risk-free - have tightened by up to 36 basis points for Asian investment grade debt in the past three months, according to a Goldman Sachs report.

High-yield spreads have been compressed by up to 83 basis points in that time, the report said.

Spreads blew out globally after Trump's so-called "Liberation Day" tariffs as global investors shied away from fixed-income assets, which made corporate borrowing costs more expensive.

"We saw some widening of credit spreads when the tariff news first hit but very quickly, investors stepped into the market and have driven spreads back to those very tight levels," said Sean Henderson, HSBC's co-head of debt capital markets for Asia Pacific.

"That has been driven by quite a number of factors, but number one of which is in the Asia markets, the supply has generally been under the level of the redemptions in the market."

Across Asia, local currency bonds were worth the equivalent of $2.4 trillion in the first six months of 2025, the LSEG data showed, up from $1.8 trillion in the same time last year.

Chinese yuan bonds accounted for 87% of the total local currency issuance in the region, while South Korean won and Hong Kong dollar bonds also rose during the six-month period.

"Local currency debt has been an incredible opportunity," said Vis Nayar, Eastspring Investments' chief investment officer at the Reuters Next summit in Singapore on Wednesday.

"They're not hugely represented in global fixed-income indices, they are very, very highly uncorrelated with global indices and hedged back to U.S. dollars, they represent a great investment opportunity."