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Treasury & Capital Markets
Yuan issuance bolsters Asia LCY bond market
Chinese currency grabs 86.9% market share in first quarter of 2024
Chito Santiago 5 Apr 2024

The local currency (LCY) bond market in Asia, outside of Japan and Australasia, continued to attract issuers and borrowers across the region as manifested by the bigger volume of issuance during the first three months of 2024.

Demonstrating once again their role as a significant funding source in the region, LCY bond transactions amounted to US$835.25 billion equivalent during January-March 2024, representing an increase of 1.8% compared with US$820.56 billion equivalent in the same period a year ago.

The LCY bond market in Asia has been on an upward trajectory since 2018, according to LSEG figures, and the issuance totalled US$3.64 trillion equivalent in 2023. It gained further importance as a funding avenue when the US Federal Reserve started its rapid interest rate hikes in March 2022 to tame inflation and restore price stability, which made US dollar borrowing more expensive.

This underpinned the slump in the issuance in G3 bond market in Asia, outside of Japan and Australasia, which plunged from a record volume of US$402.50 billion in 2021 to US$202.06 billion in 2022 and to US$172.80 billion in 2023.

In terms of currency, issuance in Chinese yuan amounted to US$726.17 billion equivalent in the first three months of 2024 – representing a market share of 86.9% – up from US$712.60 billion in the corresponding period a year ago. Several Chinese issuers and borrowers, including state-owned enterprises, continued to rely on the domestic bond market for funding on the back of lower interest rates.

The higher renminbi issuance actually helped offset the declines noted in other LCY markets in the region this year, such as Indian rupee, Hong Kong dollar, Thai baht, Malaysian ringgit, Taiwanese dollar, Indonesian rupiah and Vietnamese dong.

The increment in yuan issuance also comes as the G3 bond volume out of China posted an increase during January-March 2024 to US$14.86 billion from US$13.73 billion a year ago, after recording declines in 2022 and in 2023.

Issuance in Korean won also went up during the review period to US$57.91 billion equivalent from US$49.53 billion in the first three months of 2023, while issuance in Singapore dollar rose to US$4.85 billion equivalent from US$3.33 billion a year earlier.

Another LCY bond market that exhibited a robust growth in the first quarter of 2024 was the Philippine peso, whose volume surged to US$1.46 billion equivalent from only US$182.45 million a year earlier.

Meanwhile, issuances in the Indian rupee bond market fell 15.3% to US$21.19 billion equivalent, while those in Hong Kong dollar amounted to US$8.92 billion (down 12.9%), Thai baht US$6.96 billion (down 22%), Malaysian ringgit US$3.20 billion (down 26%), Taiwanese dollar US$2.95 billion (down 2.3%), Indonesian rupiah US$1.60 billion (down 29.1%) and Vietnamese dong US$9.76 million (down 99.1%).

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