Taiwan’s booming foreign-currency bond market will keep expanding next year after an eight-fold increase this year, the top arranger of the debt said.
SinoPac Securities Corp (永豐金證券) forecast US$20 billion of sales next year, up from a projected US$15 billion for this year and US$1.8 billion last year, said Leon Huang, the head of fixed income in Taipei. Eighty-four percent of sales this year have been denominated in US dollars.
Banks including Goldman Sachs Group Inc and JPMorgan Chase & Co flocked to the nation to sell bonds this year after the government excluded locally issued foreign-currency debt from insurers’ overseas investment quota in May.
The government has made it easier for local financial institutions to invest abroad in the past two years after sluggish growth and loose monetary policy pushed local yields to the lowest levels outside Japan and Europe.
“The government will continue toward the direction of easing policy” in regard to the local bond market, Huang said in an interview on Friday last week.
“At the beginning, the banks came to establish funding channels, and gradually we’ll see more large corporates enter this market as well,” he said.
International lenders, looking to tap Taiwanese insurers’ US$574 billion of assets, accounted for all but three of the 43 foreign-currency debt sales in Taiwan this year. In a sign other types of companies are starting to follow suit, Verizon Communications Inc, the biggest US wireless carrier, sold US$870 million of notes last month in the first non-bank US dollar bond sale in 13 years.
The nation’s benchmark 10-year sovereign yield fell more than a percentage point over the past decade to 1.71 percent today as the central bank cut its policy rate to a record-low 1.25 percent after the 2008 financial crisis and maintained it at 1.875 percent since June 2011.
SinoPac Securities, a unit of SinoPac Financial Holdings Co (永豐金控), helped arrange 14 sales this year, more than any other financial institution, according to data from bond exchange GRETAI Securities Market. It was one of the joint lead managers for Industrial & Commercial Bank of China Ltd’s (ICBC, 中國工商銀行) 700 million yuan (US$114 million) offer last month, which was listed in Taiwan and Singapore.
More foreign-currency notes will be cross-listed in Taiwan and other markets next year as a larger pool of investors helps lower funding costs for issuers, Huang said.
The company is in talks to take part in a yuan debt sale next year that will be cross-listed in Taiwan, Hong Kong and Singapore, he said, declining to name the issuer.
Following May’s regulatory changes, demand from the insurance industry has shaped Taiwan’s international debt market. Callable notes maturing in 2034 or later account for 80 percent of sales so far this year. A callable feature boosts yields for insurers, while long tenors match the industry’s liabilities.
Long-term US dollar debt will continue to dominate the market next year, Huang said.
“Currently in Taiwan, long-term institutional investors’ funds are more ample,” he said. “Eventually the demand will meet a limit. But for now, issuance will keep climbing.”
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