The spread between dollar-denominated Asian bond yields and U.S. treasury yields has collapsed to 2.44% vs. 7.62% in December 2008, as per J.P. Morgan.
It appears that trouble in the west is making strong Asian corporates look like relative safe havens. Thus investors can earn yields above treasuries while investing in the perceived safety of companies residing within the world’s most promising economic growth region.
At the same time, Asian corporates get to cash in on dirt cheap financing thanks to ultra-low U.S. interest rates. It’s another example of Western liquidity overflowing into Asia.
“It’s one of the cheapest times to borrow in U.S. dollars, and at the same time, there’s a lot of cash floating around,” said Rajeev de Mello, head of Asian investment for Western Asset Management Co., which oversees $506 billion. U.S. and European pension funds “want a slice of the action,” De Mello, who is based in Singapore, said in a phone interview.