Indian Overseas Bank (IOB) is marketing the first dollar-denominated bonds from the Asia-Pacific region in a week after yields on Indian debt in the U.S. currency tumbled to a 12-month low. Bond risk rose in Asia.
Indian Overseas Bank is offering 5 1/2-year notes yielding about 430 basis points more than similar-maturity Treasuries, according to a person familiar with the matter who asked not to be identified because the details are private. Yields on dollar debt from Indian borrowers dropped to 5.6 percent on Aug. 10, the least since Aug. 19 last year, according to a JPMorgan Chase & Co. index.
Dollar bond sales last week dipped to the least since the five days ending July 6, with no sales after China Petrochemical Corp., Sound Global Ltd. (SGL) and Westpac Banking Corp. (WBC) raised $1.9 billion on Aug. 6, according to data compiled by Bloomberg. Issuance in Asia is expected to remain patchy this week as August is traditionally a quieter month with some investors on holidays, according to Jefferies Group Inc.
“Dollar bond sales will probably be sporadic this week,” said Brayan Lai, a Singapore-based desk analyst in emerging market credit trading at Jefferies. “There’s a large pipeline from Indian banks but public demand is low as there’s concern about their future growth.”
The state-run lender paid a 290 basis-point premium when it sold $500 million of 5 1/2-year bonds in April 2011, according to data compiled by Bloomberg.
The company hired banks to help arrange a $100 million, two-year loan, people familiar with the matter said Aug. 7. Banks have until Aug. 17 to respond and Indian Overseas Bank is offering to pay a margin over the London interbank offered rate of 175 basis points, the person said.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan increased 2 basis points to 150.5 as of 1:06 p.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The gauge dropped 9.5 basis points last week, its ninth decline in the past 10 weeks, according to data provider CMA.
The Markit iTraxx Australia index advanced 2 basis points to 157 basis points as of 10:31 a.m. in Sydney, National Australia Bank Ltd. (NAB) prices show. The measure fell 10.2 basis points last week, its biggest same period decrease in two months, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.
The Markit iTraxx Japan index declined 1 basis point to 185 as of 9:30 a.m. in Tokyo, Citigroup Inc. prices show. The benchmark is set for its lowest close since Aug. 1, CMA prices show.
Credit-default swap indexes are benchmarks for insuring bonds against default and traders use them to speculate on credit quality. A drop signals improving perceptions of creditworthiness, while an increase suggests the opposite.
The swap contracts pay the buyer face value in exchange for the underlying securities if a borrower fails to meet its debt agreements. A basis point is 0.01 percentage point.
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