Apple Raises $1.4 Billion in Taiwan on Larger Insurer Appetite

Jun 08, 2016

Low yields in Taiwan continue drive foreign-currency issues
Canada’s Manulife also sells $1 billion of bonds in Taiwan

Apple Inc. sold $1.38 billion of dollar bonds in Taiwan while Canada’s Manulife Financial Corp. also priced $1 billion of securities, as such debt offerings in the jurisdiction jump amid demand from insurers.

The sales bring issuance of such corporate securities to $23 billion for the year, up 53 percent from the same period in 2015, data compiled by Bloomberg show. Domestic life insurers looking for higher yields are driving the trend, said Lawrence Lai, Asia rates strategist at Standard Chartered Plc. Apple’s 30-year note has a 4.15 percent coupon, and Manulife’s bond with the same maturity has a 4.7 percent coupon. Such multi-decade debentures also suit the needs of life insurers which must make longer-term investments, Lai said.

A regulatory change in 2014 opened the floodgates for about $600 billion of life insurance assets in Taiwan to invest more freely in foreign-currency bonds. Since then, global issuers including Goldman Sachs Group Inc. have sold almost $80 billion in U.S. dollar debt to Taiwanese life insurers. The largest offering in the island’s market for bonds in foreign currencies was AT&T Inc., which raised $2.62 billion in 2015.

“At the beginning there were more financials, but life insurers don’t really want to hold more financials,” Lai said. “Now the mix is healthier.”

As yields have fallen at home, life insurers in Taiwan have avoided local debt in favor of foreign notes with higher yields. For the first time since 2008, life insurers didn’t buy any 20-year Taiwan government bonds in an April sale. Taiwan banks instead picked up the notes at a record-low 1.36 percent yield.

Taiwan’s new financial markets regulator, Ding Kung-wha, said in an interview in May that though he was concerned about exchange-rate and other risks associated with the $300 billion of life insurance funds invested in all foreign-currency assets, he wasn’t in favor of closing the spigot.