Brayan Lai, Credit Analyst, said, “The theme of the Asia credit bull will likely continue on the back of long-term above-par growth expectations in the region, short-to-medium-term search for yield and longer-term increase of portfolio allocations towards Asian and EM assets. Accompanying our benign outlook for Asia credit will be shifting dynamics specifically within banks, financials and conduits. These will lead to a new paradigm in the world, including lower levels of leverage leading to sub-par growth in the Western developed markets, regulatory changes to Basel II, treatment of bank capital and firm-wide risk management. The new market environment will continue to see more rational risk-taking and reasonable pricing of risk. Fundamentals will continue to be weak with a protracted recovery phase, continuing flush liquidity and a zero-rate world in the developed markets, with banks and other financial conduits still expecting further credit losses. Credit markets have subsequently stepped-in to fill the void and will continue to so subject to risk/reward profile.”

 

Dilip Parameswaran, Executive Director, Debt & Credit Markets, Asia ex-Japan, said, “Debt markets have recovered substantially since the beginning of 2009, in terms of both pricing and new issue volumes. The improvement is also widespread across Euro, USD and Asia-Pacific G3 bond markets. The current markets provide an excellent opportunity for issuers to lock in fixed-rate funding at a low cost for medium- to long-term. The fixed-rate for funding is close to the decade lows. One key reason is that the US Treasury yields are near 40-year lows, and the other reason is that the credit spreads have contracted to a pre-Lehman-collapse level. The liquidity in credit markets is also very high, providing funding to various types of borrowers. Looking ahead, the current moment is likely to be one of the best timings for new issues because the U.S. Treasury yields are likely to go up significantly, negating any potential savings from possible lower credits spreads.”