Oversea-Chinese Banking Corp. (OCBC) is marketing a sale of dollar-denominated notes that may price as soon as today. Asian bond risk fell on signs the European Central Bank may buy debt from countries in financial distress.
The Singaporean lender is offering the 10 1/2-year notes, which will be eligible as Tier 2 capital and can be called after 5 1/2 years, to yield about 270 basis points more than five-year U.S. Treasuries, according to a person familiar with the matter. The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 2 basis points to 152 as of 8:19 a.m. in Hong Kong, Credit Agricole SA (ACA) prices show. The index is headed for its lowest close since Aug. 29, according to data provider CMA.
Mario Draghi, the ECB’s president, said yesterday he would be comfortable buying government bonds with maturities of up to about three years to bring down borrowing costs. Dollar debt issuance in the Asia-Pacific region fell 80 percent to $6.5 billion in August from July, data compiled by Bloomberg show. Asian bond risk dropped 6 basis points last month, declining for a third-straight period, according to CMA.
“The mild risk-on environment is conducive to Asian bonds,” said Frances Cheung, a senior strategist at Credit Agricole. It’s natural to see some pick-up in primary-market activity following the regular lull in the summer, Cheung said.
Japan Finance Organization for Municipalities, the fundraising body known as JFM, is considering pricing five-year dollar debt at about 80 basis points more than mid-swaps, a person with knowledge of the matter said. Australia & New Zealand Banking Group Ltd. (ANZ) is looking to sell a three-year covered bond in dollars, another person said.
The Markit iTraxx Japan index was little changed at 209 basis points as of 9:18 a.m. in Tokyo, Citigroup Inc. prices show. It has ranged between 168.5 basis points and 211.2 basis points this quarter, according to CMA, which is owned by McGraw- Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.
The Markit iTraxx Australia index dropped 5 basis points to 167.5 basis points as of 10:14 a.m. in Sydney, according to Westpac Banking Corp. (WBC) It rose 2.8 basis points last month, the CMA data show.
Credit-default swap indexes are benchmarks for protecting 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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