Japan Company Bond Risk Rises on China Tension; DBJ Markets Debt
Japanese corporate bond risk rose for the first time in five days as a dispute with China about islands in the East China Sea mounted. Development Bank of Japan Inc. and Bangkok Bank PCL are marketing dollar-denominated debt.
The Markit iTraxx Japan index climbed 5 basis points to 180 basis points as of 9:11 a.m. in Tokyo, Citigroup Inc. prices show. The measure is on track for its first increase since Sept. 10, according to data provider CMA. Development Bank of Japan is considering a sale of seven-year bonds to yield in the mid-to- high 40 basis-point area more than the benchmark mid-swap rate, according to a person familiar with the matter who asked not to be identified because the terms aren’t set.
Panasonic Corp., Toyota Motor Corp. and Honda Motor Co. reported damage to their operations in China after thousands protested on Sept. 16 against Japan’s purchase of the uninhabited territory from a private owner. Panasonic and Canon Inc. said yesterday that they plan to shut some plants through today. The islands are known as Diaoyu in Chinese and Senkaku in Japanese.
“The dispute may negatively affect manufacturing companies, including steel or electronics corporates,” said Taketoshi Tsuchiya, Tokyo-based director of credit trading at Barclays Plc. “This is a serious situation, with lots of car companies, especially Nissan, depending on China.”
Major Japanese auto and technology manufacturers may see pressure on their ratings if the dispute worsens and is prolonged, Fitch Ratings said today.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan advanced 2 to 116.5 as of 8:08 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The gauge fell to a near 14-month low at 114.4 on Sept. 14, 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 rose 2 to 138 as of 11:21 a.m. in Sydney, Westpac Banking Corp. (WBC) prices show. The benchmark dropped to 135.25 last week, the lowest since March 21, according to CMA.
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.