The value of foreign currency-denominated bonds issued in Taiwan from Jan. 1 to April 15 was up nearly 57 percent from a year earlier, the Financial Supervisory Commission (FSC) said yesterday.
The sales spike came as many foreign entities rushed into the market before the government tightens rules on how quickly bond issuers can allow investors to redeem their funds, the commission said.
Concerns that interest rates might rise also led bond issuers to more aggressively sell debt early in the year, the commission said.
During the nearly four-month period, 54 tranches of foreign currency-denominated bonds were issued in Taiwan, little changed from a year earlier, but the value of those bonds rose almost 57 percent to US$21.05 billion, FSC data showed.
Among the biggest issuers of debt during the period was Apple Inc, which issued US$1 billion worth of 30-year bonds on Taiwan’s over-the-counter market early last month with a coupon rate of 4.3 percent.
It was the second time that the US consumer electronics giant issued bonds in Taiwan after the first tranche of US$1.38 billion sold in June last year.
The commission said foreign bond issuers face no restrictions on when investors can redeem their bonds, and many allow bonds to be redeemed a year or two after the debt is sold.
The quick redemption periods have led many life insurers to search for new investment targets to absorb their funds, creating greater investment risk, the commission said.
It said it wants to set a minimum period of five years before issuers allow investors to redeem the bonds.
Local life insurers, which sit on plenty of cash, are generally the biggest investors in bonds.
FSC Insurance Bureau Deputy Director-General Shih Chiung-hwa (施瓊華) said that draft regulations for the minimum five-year redemption period were completed at the end of last month.
However, the Taipei Exchange, which runs Taiwan’s bond market, hopes the commission will lower the period to three years to give the market more flexibility.
Shih said the commission is open to further discussion on the issue and confirmed that the number of years before bonds can be redeemed has yet to be finalized.
Taiwan Ratings Corp (中華信評), a local partner of US-based Standard & Poor’s, said interest rate expectations might have also driven the surge in bond sales.
It said many potential bond issuers expect interest rates in Taiwan to rise in upcoming quarters and were moving quickly to sell bonds before the expected rate hikes.
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