(Bloomberg) -- Dollar bond sales in Asia are off to their weakest start in eight years, bucking a strong global trend as regional borrowers raise cheaper funds at home and wait for the Federal Reserve to cut interest rates. 

High borrowing costs prompted Philippines property firm Vista Land & Lifescapes Inc. to postpone its sale, contributing to the 28% year-on-year drop in US-currency debt issuance. Sales in ex-Japan Asia has totaled just $18.2 billion since 2024 began, Bloomberg-compiled data show. This is in stark contrast to the US and Europe, where issuers have smashed records amid a deals bonanza.

Thanks to the Fed’s historic monetary tightening campaign, Asian companies and governments have found it less expensive to sell debt locally, especially in China where authorities have stepped up policy easing to cure an ailing economy. Global concerns about rising financial stress in the world’s No. 2 economy, especially its unprecedented property crisis, also have weakened the appetite for and momentum of dollar debt sales from the country.

“A lot of these companies and economies have decent access to local markets,” said Sheldon Chan, a portfolio manager at T. Rowe Price Group. “They are not desperate to need dollar bond access.”

The issuance drought has come even as risk premiums on dollar notes in the region have narrowed. Credit spreads on investment-grade bonds in Asia outside Japan moved to their tightest level on record last week, according to a Bloomberg index. 

With Asian borrowers lured away by cheaper financing at home, the narrow spreads also have weighed on demand as investors’ risk-reward equation looks less appealing. 

“We currently have a preference for more liquid developed market credits given attractive all-in yields,” said Ajeet Choudhary, managing director, cross-asset trading at JPMorgan Private Bank. “We would look to find value in emerging market debt if spreads widen to provide adequate compensation for additional risks.

The subscription ratio for dollar offerings in Asia has reached around four times the number of accepted bids so far this year, below the five-year average, Bloomberg-compiled data show. 

Asian borrowers’ incentives to sell more dollar debt also hinges on the Fed’s policy outlook.

“As central banks paused rates in late 2023 and market expectations that the Fed may cut rates as soon as Q2 2024, some issuers may want to wait to issue at lower rates,” said Carinn Neo, senior portfolio manager at Paragon Capital Management Singapore.

--With assistance from Ditas Lopez and Kristine Lian.

(Updates to add pulled deal in second paragraph, chart after seventh)

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