Investor caution towards U.S. Treasuries is driving a wave of portfolio diversification, which is proving advantageous for the Asian Infrastructure Investment Bank (AIIB).
The AIIB's acting chief financial officer, Domenico Nardelli, stated that the bank is on track to achieve a record fundraising year, fueled by rising demand for dollar-denominated assets beyond U.S. government debt. In an interview, Nardelli explained that investors are keen to maintain their dollar exposure but are simultaneously seeking a "higher degree of diversification." This dynamic allows institutions like the AIIB to issue dollar bonds at yields that are much closer to those of U.S. Treasuries, a level which was previously unattainable.
Some bond investors are moving away from U.S. Treasuries, favoring bonds from other global issuers due to doubts about the Federal Reserve's ability to control inflation triggered by the Iran conflict. The sell-off in long-dated U.S. bonds has pushed the 10-year Treasury yield to around 4.6%.
Nardelli noted that the AIIB has already secured approximately $8.3 billion of its $11 billion funding target for 2026, with dollar-denominated financing accounting for about half of the total. This follows a record fundraising year in 2025, when the bank raised $10.2 billion. The Beijing-based multilateral lender, which holds a AAA debt rating, has recently been focused on assisting member countries, like Bangladesh, in coping with soaring food and energy prices.
According to the AIIB's latest social impact assessment report, around 70% of its financing last year was directed towards green projects, including clean energy and transportation. Nardelli indicated that Asian investors, particularly Chinese banks, have shown robust interest in the AIIB's securities, especially its dollar-denominated callable bonds. Earlier this year, Chinese regulators guided banks to curb their exposure to U.S. Treasuries due to concerns over concentrated investment and market volatility, though analysts suggest Beijing may have shifted some holdings to European custodial accounts.
"As the trend of asset allocation diversification continues, the market environment should remain favorable for strong demand," Nardelli said. "Alternative issuers like us will continue to benefit from this."
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