(Bloomberg) -- Taiwan’s corporate bond issuance this year has hit a seven-year low, as companies scale back offerings on expectations that local interest rates have peaked and could move lower.
Taiwanese companies issued $533 million of Taiwan dollar bonds in July, a third of the total a year earlier, Bloomberg-compiled data shows. Total issuance from January to July fell to $9.02 billion, the lowest level since 2017.
Those numbers don’t include life insurers, which have issued a record number of subordinated bonds to meet capital requirements, and have attracted buyers with the notes’ higher-than-average yields.
The broader slowdown contrasts with the bond market bonanza seen in most of the rest of Asia, where issuance has surged on increasing appetite for yield. Taiwan’s interest rates sit at a 16-year high of 2%, making non-financial firms reluctant to issue bonds.
“Companies take account of global market conditions when making capital and cost allocations,” Sam Chang, fixed income trader at Hua Nan Securities. As the Federal Reserve and other central banks start looking toward policy easing, companies are waiting to see if those decisions will also influence Taiwan, he added.
Also potentially denting investor demand are the subordinated bonds issued by insurers.
Domestic bond investors have allocated a lot of capacity to bonds issued by Taiwanese life insurers, so that could also have some implications on demand, said Andy Chang, a senior director at Taiwan Ratings Corp.
With the timing of any rate cut in Taiwan uncertain, some companies are seeking out alternative funding routes, such as bank loans and commercial paper.
Commercial paper issued by Taiwanese companies rose 15% in the first six months of the year to NT$10.4 trillion ($317 billion), compared with the same period last year, according to central bank data.
“For bank loans, large corporates have nice bargaining power as the banking environment is quite competitive,” said Taiwan Ratings’ Chang. Commercial paper comes in shorter tenors, providing cheaper costs under the current yield curve, he added.
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