Asian investors are increasingly turning to Gulf bonds and loans, with bond issuance in the Middle East and North Africa region rising 20% to $126 billion in the first nine months of the year. This growth is driven by rising financing needs in oil-producing economies and growing demand from Asian investors reshuffling their portfolios.

Chinese investors are diversifying away from U.S.-based investments, with Chinese capital flowing through Asian accounts. Gulf bonds offer higher yields compared to similarly rated credits in Asia, attracting Asian investors who bought 40% of AA-rated Qatar’s $1 billion bond priced at just 15 basis points over U.S. Treasuries.

Asian institutions have driven a rise in the region’s debt allocations, with average Asian allocation in Gulf debt issues now ranging between 15% and 20%. Gulf issuers can price bonds at near historic-low spreads over U.S. government debt, offering higher yields to Asian investors compared to similar Asian credits.

Gulf borrowers are planning to issue bonds in yuan on China’s domestic fixed-income market, known as “Panda bonds.” This move is expected to unlock access to an over $20 trillion market, with early deals including Saudi National Bank issuing the first Singapore dollar bond and the UAE emirate Sharjah raising 2 billion yuan in October.

Read more at Yahoo Finance: Analysis-Asian investors flock to Gulf debt in hunt for yield and growth