Asian US dollar (USD) investment-grade (IG) and high-yield (HY) credit spreads tightened in September after three straight months of widening, as we start to see a consolidation of credit spreads. Bloomberg Asia IG spreads tightened m-o-m by 1 basis point to 85 basis points (bps) and HY spreads tightened by 12 bps m-o-m to 504 bps as at Sept 30. The 50 bps rate cut announced by the US Federal Reserve and the renewed stimulus package released by China have boosted risk appetite and caused the credit spreads to tighten.
Improved primary market issuance
As a result of the Fed rate cut, the market has been very receptive and has seen quite a large number of issuances in September (US$25.3 billion ($33 billion)) compared to August (US$8.2 billion). This was a stark difference of 207%, based on Bloomberg data and our calculations as of Sept 30. With lower costs of borrowing after the rate cut and still tight credit spreads, companies or issuers could remain incentivised to raise debt, either for refinancing or if they are positive on growth prospects. Significant issuers in September included sovereign linked issuers and corporations such as Saudi Arabian Oil Co or Aramco (two issuances totalling US$3 billion), Meituan (two issuances totalling US$2.5 billion) and the Export-Import Bank of Korea (three issuances totalling US$2 billion) as of Sept 30.
