Bond risk in Asia fell to a five- month low after the European Central Bank announced a bond- buying plan to support its most indebted nations. Borrowers from the region paused dollar-denominated debt sales.
The cost of protecting corporate and sovereign bonds from default in Asia outside Japan declined to the lowest level since March 19, according to Royal Bank of Scotland Group Plc prices and CMA data. No companies from the Asia-Pacific region are marketing bonds in the U.S. currency today after issuers raised $8.4 billion this week, the most in eight weeks, according to data compiled by Bloomberg.
The ECB detailed plans to buy bonds to curb borrowing costs and contain the region’s sovereign debt crisis yesterday, spurring a global rally in riskier assets. Payroll data in the U.S. later today is expected to show that employers hired an extra 130,000 people in August, according to the median estimate of 92 analysts surveyed by Bloomberg.
“A good market just became fantastic thanks to the ECB,” said Alan Roch, the Singapore-based head of Asia-Pacific bond syndicate at RBS. “We’re expecting next week to be a blockbuster week in terms of bond supply.”
The Markit iTraxx Asia index of credit-default swaps on 40 investment-grade borrowers outside Japan slid seven basis points to 137.5 basis points as of 8:31 a.m. in Hong Kong, according to RBS prices.
The Markit iTraxx Australia index fell 10 to 153 as of 11:08 a.m. in Sydney, according to Credit Agricole SA. The gauge is headed for its biggest weekly drop since December, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.
Trade & Development Bank of Mongolia LLC plans to meet investors in Asia and Europe next week before a possible dollar bond sale, according to a person familiar with the matter, who asked not to be identified because the details are private.
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.
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