Barclays Plc (BARC), the U.K.’s second-largest bank by assets, predicts Asian companies will further increase sales of euro-denominated bonds after issuing a record amount of debt in the currency.
Companies from Asia outside Japan have sold 5.5 billion euros ($7.6 billion) of bonds in the shared currency since Dec. 31, more than any previous year and double 2012 volumes, data compiled by Bloomberg show. China Petrochemical Corp., Asia’s largest refiner, led 1.55 billion euros of note offerings this month, the most by the region’s issuers since May, data compiled by Bloomberg show.
“Issuers here are finding that the euro market is increasingly competitive,” said Jon Pratt, head of debt capital markets for Asia at Barclays. “We have introduced a range of European insurance companies and pension funds to Asian companies this year. These investors have previously never bought Asian credits.”
Money flows into European bond funds hit a 25-week high in the period to Oct. 23, even as total debt funds took in just $527 million, according to data provider EPFR Global. The political impasse in the U.S. as Congress struggled to reach an agreement on raising the debt ceiling sapped appetite for the nation’s assets while favoring Europe, EPFR wrote in an e-mailed note dated Oct. 11.
About 35 percent of a global high-yield bond fund run by Brandywine Global Investment Management LLC, a unit of Legg Mason Inc., is already invested in Europe, according to Brian Kloss, a Philadelphia-based money manager at the company, which oversees about $48 billion. The fund will increase its holdings as the region returns to growth, he said in an interview last week in Hong Kong.
Globally, borrowers pay an average 1.91 percent for euro debt, 29 basis points less than for dollar notes, Bank of America Merrill Lynch indexes show. Euro-denominated notes gained 1.22 percent this year as of the end of last month, beating Asian dollar-denominated bonds, the indexes show.
“Some Asian investors are shifting some of their investments into euro currency as they are getting more comfortable with the currency fundamentals and are seeing more supply from the region,” said Pratt. These funds view it as a way to “partially mitigate the risks of U.S. dollar currency depreciation and rising U.S. interest rates.”
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