The manager of the world’s biggest bond fund forecasts sales of dollar-denominated notes from Asia will climb to a record $150 billion in 2014 as yield premiums shrink to a six-year low.
Pacific Investment Management Co. predicts the size of the regional market may double to $1 trillion in three years, Raja Mukherji, head of Asian credit research in Hong Kong, and Ronie Ganguly, portfolio manager in Singapore, wrote in a report today. Pimco, which had $1.94 trillion under management in March, sees opportunities in state-owned enterprises in energy and utilities, as well as Basel III-compliant, Tier 2 issues from Japanese and South Korean banks, they said.
“Global investor demand for hard-currency offshore bonds has led corporations to tap longer-tenor debt at attractive rates versus short-term bank funding,” Mukherji said in a July 7 e-mail interview. There’s also a desire among banks to increase fee-based business via the bond market given stricter capital requirements for loans, he said.