BRICS Rejects US Dollar Bonds: Worst Sales Start Since 2016

• US Dollar Bonds Lose Appeal in BRICS and Asian Markets
• Rising $34 Trillion Debt Ignites Fear Among Developing Countries
• Worst Start for US Dollar Bond Sales in Asia Since 2016
• US Dollar Bonds Seen as Risky Amid Mounting Debt and Decreasing Interest Rates

US Dollar Bonds Lose Appeal in BRICS and Asian Markets

BRICS countries and larger Asian markets are losing interest in US dollar bonds. Sales saw a significant drop in January 2024. The global shift away from the US dollar is due to the increasing US debt, which has surpassed $34 trillion. The considerable risk associated with holding the US dollar in reserves for BRICS and other Asian nations is becoming evident as a potential market downturn could result in economic instability in these countries. The fear of a US dollar debt default continues to loom over Asian countries, contributing to the worst start of USD bond sales seen since 2016.

Rising $34 Trillion Debt Ignites Fear Among Developing Countries

The dwindling demand for US dollar bonds is an indication that developing countries are becoming increasingly wary of the escalating $34 trillion US debt. The rapidly increasing debt is seen as a major concern and countries that have their reserves in the US dollar are feeling the heat. The switch away from the dollar by BRICS nations could significantly impact numerous sectors in the United States.

Worst Start for US Dollar Bond Sales in Asia Since 2016

According to Bloomberg, the US Dollar bond sales in Asia have experienced their weakest start in eight years. Regional borrowers are starting to raise funds at lower costs, making the US dollar a pricier option for developing nations. Contrary to a decade ago, when US dollar bonds were a lucrative investment for BRICS and the wider Asian market, interest in these bonds has significantly diminished.

US Dollar Bonds Seen as Risky Amid Mounting Debt and Decreasing Interest Rates

The Federal Reserve's decision to cut interest rates and the soaring $34 trillion debt are among the factors that are making US dollar bonds unattractive. Asian borrowers are offering stronger incentives, positioning the US dollar as a risk for further accumulation. As Carinn Neo, Senior Portfolio Manager at Paragon Capital Management Singapore, mentioned, With Central Banks pausing rates in late 2023 and market expectations for the Fed to potentially cut rates as early as Q2 2024, some issuers may prefer to hold off on issuing until rates are lower.

Edited by Jonathan Stoker