Foreign currency-denominated bound sales up over 50%

2017/04/21 18:57:19
Foreign currency-denominated bound sales up over 50%

Taipei, April 21 (CNA) The value of foreign currency-denominated bonds issued in Taiwan was up more than 50 percent from a year earlier from Jan. 1 to April 15, the Financial Supervisory Commission (FSC) said Friday.

The spike in bond sales came as many foreign entities rushed into the market before the government tightens rules on how quickly bond issuers can allow investors to redeem their funds, the FSC said.

Concerns that interest rates may rise in the future also led bond issuers to more aggressively sell their debt early in the year.

During the nearly four-month period, a total of 54 tranches of foreign currency-denominated bonds were issued in Taiwan, little changed from a year earlier, but the value of those bonds rose almost 57 percent to US$21.05 billion, according to FSC data.

Among the biggest issuers of debt during the period was Apple Inc., which issued US$1 billion worth of 30-year bonds on Taiwan's over-the-counter (OTC) market in early March with a coupon rate of 4.3 percent.

It was the second time the U.S. consumer electronics giant issued bonds in Taiwan after the first tranche of US$1.38 billion sold in June 2016.

The FSC, Taiwan's financial regulator, said foreign bond issuers currently face no restrictions on when investors can redeem their bonds, and many allow bonds to be redeemed a year or two after the debt is sold.

The quick redemption periods have led many life insurers to search for new investment targets to absorb their funds, creating greater investment risk, the FSC said, and it wants to set a minimum period of five years before issuers allow investors to redeem the bonds.

Local life insurers, which sit on plenty of cash, are generally the biggest investors in bonds.

Shih Chiung-hua (施瓊華), deputy director of the FSC's Insurance Bureau, said draft regulations for the minimum five-year redemption period were completed at the end of March.

But the Taipei Exchange, which runs Taiwan's bond market, hopes the FSC will lower the period to three years to give the market more flexibility.

Shih said the FSC is open to further discussion on the issue and confirmed that the exact number of years before bonds can be redeemed has yet to be finalized.

Taiwan Ratings, a local partner of U.S.-based Standard & Poor's, said interest rate expectations may have also driven the surge in bond sales.

It said many potential bond issuers expect interest rates in Taiwan to rise in upcoming quarters and were moving quickly to sell bonds in Taiwan before the expected rate hikes.

(By Tsai Ui-chu and Frances Huang)
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