Asian dollar-denominated bond issuance is expected to see a significant uptick in 2025, with an estimated rise of 20% over the previous year, largely driven by a surge in Chinese debt deals and the impact of U.S. interest rate cuts, which have made issuing bonds in dollars more cost-effective for companies than relying on local currency debt.
According to LSEG data and term sheets reviewed by Reuters, more than $6 billion worth of dollar bonds were issued in the early days of 2025. Notable deals included bond issues from the Export Import Bank of Korea and aluminum producer China Hongqiao Group.
Rishi Jalan, Head of Citigroup’s Asia Pacific Debt Syndicate, predicted that dollar bond issuance from Asia—excluding Japan and Australia—could reach between $220 billion and $225 billion in 2025, up from around $175 billion in 2024. “To reach that level, a lot of guns will have to fire to meet that volume,” Jalan remarked. He pointed to expectations for increased issuance from major Chinese tech firms and a potential rebound in Indian issuances, which had been increasingly concentrated in local currencies in recent years.
China Leading the Charge
China is poised to be the primary driver of this dollar debt surge. The country issued a record $77.1 billion in dollar-denominated bonds in 2024, marking an 81% increase from the previous year’s $42.5 billion, according to Dealogic data. However, the volume was still far from the 2019 peak of $210.5 billion.
China’s technology giants are expected to play a leading role in the upcoming growth in dollar bond issuance. Companies like Alibaba and Meituan raised a combined $7.5 billion in late 2024, funding expansion plans and debt reduction efforts. Bankers anticipate a continuation of this trend, with major tech firms tapping the dollar bond market for capital to support future growth. “High-grade Chinese companies are more comfortable with current rates compared to 2023 and the first half of 2024,” said Avinash Thakur, head of Capital Markets Financing, Asia Pacific, at Barclays. “There will be issuance in tech, as they have significant funding needs, as well as in the industrials sector.”
Despite the surge in issuance from China’s top firms, the troubled property sector remains a major concern. Once a large issuer of junk bonds, the sector continues to face turmoil after a severe debt crisis in 2021. Analysts believe it is unlikely that the property sector will return to the dollar bond market anytime soon, given persistent challenges like falling property prices and high debt levels.
Impact of U.S. Interest Rate Cuts
One of the key factors driving the increase in dollar bond issuance is the shift in U.S. interest rates. After the Federal Reserve slashed rates by a full percentage point over its final three meetings of 2024, borrowing costs in the dollar market have become more attractive. This change in interest rate policy has made it more favorable for companies in Asia to issue bonds in dollars rather than relying on domestic currencies or local bank financing, which had been more common during the previous years of higher U.S. rates.
The U.S. Federal Reserve is expected to keep rates in the current range of 4.25% to 4.5% for the next meeting scheduled for January 28-29, 2025, maintaining a relatively low-cost borrowing environment for dollar bond issuers.
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