Asian bond risk jumped to the highest in four weeks after Japan’s industrial production dropped, adding to signs the region’s economy is slowing. China Oilfield Services Ltd. (2883) sold its debut dollar-denominated bond.
The cost of insuring debt from non-payment in Asia increased 3 basis points to 156 as of 2:06 p.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The Markit iTraxx Asia index is poised for its highest close since Aug. 3, according to data provider CMA. China Oilfield Services’s $1 billion of 10-year notes priced yesterday took dollar bond issuance from the Asia-Pacific region to $6.5 billion in August, an eight-month low, data compiled by Bloomberg show.
“In Asia there is heightened risk aversion,” said Michael Bush, head of credit research at National Australia Bank Ltd. Investors are now awaiting any clues on monetary policy from Federal Reserve Chairman Ben S. Bernanke at a symposium of global central bank leaders in Jackson Hole, Wyoming, Bush said.
Japan’s industrial production slid 1.2 percent in July from June, the Trade Ministry said today. Consumer prices in Asia’s second-biggest economy dropped 0.3 percent from a year earlier, underscoring concern that the country remains mired in deflation. Industrial output in South Korea also fell last month, Statistics Korea said today. That marks the second monthly decline as a global slowdown undermines growth.
China Oilfield priced its 10-year dollar notes, sold through unit COSL Finance (BVI) Ltd., to yield 170 basis points more than Treasuries, Bloomberg-compiled data show. The company received $9 billion of orders from 340 accounts, according to a person familiar with the matter, who declined to be identified because the matter is private.
The Markit iTraxx Australia index jumped 9 basis points to 172 basis points as of 10:25 a.m. in Sydney, National Australia Bank Ltd. prices show. The benchmark is poised for its biggest daily gain since July 23, 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 advanced 5 basis points to 213 basis points as of 9:26 a.m. in Tokyo, Deutsche Bank AG prices show. The index is set for a 28 basis-point advance this month, the biggest monthly rise since April, CMA prices show.
The gauge of bond risk in Asia had fallen 51.6 basis points this year as of yesterday’s close. In Australia, the index has dropped 12.8 basis points, while Japan has climbed 20.7 basis points, according to CMA.
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.