Mon, Apr 13, 2020 – 5:50 AM
THE droop in US company bonds is prone to spur cut price searching by Taiwan life insurers.
The biggest insurer by belongings in Taiwan, Cathay Life Insurance coverage, has already stepped into the market.
“We have now purchased US funding grade long-tenor company bonds on dips in March, as credit score spreads widened so much,” mentioned Abel Lin, managing senior govt vice-president at Cathay Life. “We’ll proceed so as to add such bonds.”
Money at Taiwan’s insurers had grown following a wave of redemptions and because the companies held their firepower amid plunging yields earlier than the coronavirus outbreak hammered belongings worldwide.
Taiwanese life insurers had NT$785 billion (S$36.9 billion) of financial institution deposits on the finish of January, essentially the most since 2012, based on knowledge compiled by Bloomberg.
Cathay Life adopted a de-risking technique over the previous yr, based on an earnings name final month.
Money positions at Taiwan’s life insurers could also be “quickly increased as of finish of first quarter after they took revenue earlier this yr”, based on Patty Wang, an analyst at Taiwan Scores.
Any dry powder would nonetheless be only a fraction of the NT$29.eight trillion – the higher a part of US$1 trillion – in life insurers’ belongings as of the tip of February, based on knowledge from the Monetary Supervisory Fee.
However Taiwanese shopping for might assist bolster broader confidence in greenback credit score. The Federal Reserve’s historic foray into the company bond market was “reassuring” traders, mentioned Cathay Life’s Mr Lin.
As a part of its newest spherical of stimulus measures, the Fed mentioned on April 9 that it’s going to fund the purchases of some sorts of high-yield bonds, collateralised mortgage obligations and business mortgage-backed securities.
“If inventory markets stabilise with threat urge for food recovering, Taiwan’s life insurers will first add funding grade company bonds on dips,” mentioned Ryan Chang, fund supervisor at CTBC Investments Co. “Funding grade company bonds could backside out after the US Fed offered liquidity to the market – which can immediate the insurers to purchase extra.” BLOOMBERG