The Hong Kong-based insurer is looking to investment-grade bonds in the region as it seeks decently yielding debt that is unlikely to be downgraded into junk territory.
Regional asset owners have started jumping into newly issued and highly rated US corporate bonds as they look to take advantage of wider spreads, say fund experts.
Asian investment-grade bonds may be less at risk of downgrades to junk than those elsewhere, but asset owners – particularly insurers – are being advised to take precautions.
Even given the prospect of a 20-year wait for a step-up, investors are ready to take the credit risk in one Hong Kong-listed leasing company. It reflects strong appetite for yield.
Issuance in Formosa bonds has crashed following regulatory changes, but insurers still desperately need higher-yielding products to meet their obligations to policy holders.
The Taiwanese insurer is also keen on Formosa bonds and high-dividend stocks, but has zero US Treasuries and is waiting for yields to rise before it buys more foreign fixed income.