Asia-Pacific bond sales fall 98% amid crisis

Tokyo: Asia-Pacific companies and governments outside Japan cut sales of bonds in dollars, yen and euros by 98 per cent and curbed bank borrowing in October as the global credit slump boosted costs and weakened lenders.

Korea Water Resources Corp., the state-run utility, was the only borrower in the region to sell G3-currency notes in a sale managed by Goldman Sachs Group Inc., data compiled by Bloomberg show.

Foreign currency bond sales amounted to $142 million, while local currency bond sales fell 61 per cent and syndicated loans fell by 51 per cent as the MSCI Asia Pacific Index had its biggest monthly loss.

"It's going to be quite a few months before we see a decent size of new lending in the region,'' said John Corrin, Hong Kong-based chairman of the Asia Pacific Loan Market Association.

"There were about 30 banks capable of underwriting $1 billion of loans 18 months ago. There are probably around 10 banks today which can do $100 million each.''

Lending seized up after Lehman Brothers Holdings Inc. collapsed in September, forcing governments to promise almost $3 trillion in bank rescue packages and triggering a slump in global stocks.

The Libor-OIS spread, a gauge of cash scarcity, climbed to a record 366 basis points and banks' cost of borrowing dollars for three months rose as high as 5 per cent on October 10 as cash injections and rate cuts by 10 major central banks failed to unlock credit markets.

Asian bank stocks fell 25 per cent last month after lenders, including Japan's Mizuho Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. cut earnings forecasts.

Tokyo-based Mizuho on Friday lowered its full-year profit forecast by 55 per cent, citing losses on investments and rising bad-loan costs.

Cost of funding

The number of borrowers at risk of credit rating downgrades rose last month to the highest since September 2005 as a global recession looms and the credit crisis crimps lending, Standard & Poor's said on Saturday.

"Many companies need money but nobody is lending. Money market rates now are falling, but they don't reflect banks' real funding costs, which have become higher than the rates,'' according to APLMA's Corrin.