Asia Shifts to Euro Debt, Challenging US Financing Dominance

A growing number of Asian corporations and sovereign issuers are opting for euro-denominated bonds, marking a decisive pivot away from traditional U.S. dollar financing. In the first 11 months of 2025, euro-denominated debt issuance by Asian entities reached €48 billion, up 37% year-on-year, while U.S. dollar issuance declined by 6% in the same period. This shift reflects a strategic move to diversify currency exposure and reduce vulnerability to U.S. monetary policy shifts, particularly as the Federal Reserve maintains higher interest rates longer than expected. The change is most pronounced in energy and technology sectors, where major firms in China, South Korea, and India have issued euro bonds to fund infrastructure and R&D. For example, a leading Chinese technology group raised €2.3 billion in November 2025, citing favorable yield spreads and reduced FX risk. Meanwhile, the yen-denominated market has seen modest growth, with JPYUSD trading near 153.20, reflecting ongoing carry trade dynamics. The move has tangible implications for key financial metrics: the US10Y yield has hovered around 4.75%, while German 10-year bunds trade at 2.45%, widening the yield differential and making euro debt more attractive. The EURUSD pair has risen to 1.0950, its highest level since early 2024, indicating stronger demand for euros in international capital markets. The ASX200 has also shown resilience, rising 3.2% year-to-date, as investors reposition portfolios amid shifting global funding trends. This trend could prompt a reevaluation of U.S. fiscal credibility and long-term interest rate differentials. As Asian borrowers reduce their dollar exposure, the demand for U.S. Treasuries may weaken, potentially pressuring yields higher. Financial institutions and multinational investors are adapting by increasing euro-based hedging and liquidity allocations, reshaping global fixed income flows.