Doosan Infracore Co. (042670) began marketing U.S. dollar-denominated bonds as offerings from companies in the Asia-Pacific region rose to $29.1 billion this month, the most for any September in at least a decade.
Doosan Infracore, South Korea’s biggest construction- equipment maker, is considering pricing revolving 30-year bonds at about 300 basis points more than five-year Treasuries, according to a person familiar with the matter who asked not to be identified because the terms aren’t set. Doosan can buy back the bonds after five years, the person said. The offering comes even as the cost of insuring corporate and sovereign bonds from default rose for a second day.
Yields on dollar debt in Asia are falling to record lows prompting companies from Korea to India and China to sell securities. Indian power generator NTPC Ltd. (NTPC) sold $500 million of bonds yesterday, attracting eight times more orders than notes available, a person familiar with the matter said. China South City Holdings Ltd. (1668), China Hongqiao Group Ltd. (1378) and China Resources Cement Holdings Ltd. (1313) are all meeting investors in Singapore today, people with knowledge of the details said.
“We’ve been expecting dollar bond issuance to reach an all-time high in Asia in 2012 given the low dollar interest rates and fund inflows,” said Edwin Chan, the head of Asian credit research at UBS AG in Hong Kong. “Chinese companies in particular will see high net issuance in the offshore market especially when domestic credit conditions are tight.”
Asian companies are paying an average 4.15 percent to sell dollar debt after costs fell to the lowest level in almost two years last week, according to JPMorgan Chase & Co. indexes. Investors put $1.25 billion into emerging market bond funds in the week to Sept. 19, the 15th week of inflows, data from EPFR Global show.
China is keeping a close watch on lending after inflation accelerated to 2 percent last month from the previous year, the first quickening in the pace of price increases in five months. Top-rated companies pay an average 4.55 percent to sell three- year debt onshore, 55 basis points more than at the beginning of the quarter, data compiled by Chinabond show.
Dollar bond sales in the region climbed to $3 billion this week, bringing the month-to-date total to $29.1 billion compared with $7.6 billion in the same period of September 2011, according to data compiled by Bloomberg. Sales in the same period of last month were $4.9 billion, as summer holidays in Europe slowed activity.
The Markit iTraxx Asia Series 18 index of 40 investment- grade borrowers outside Japan rose 2 basis points to 137 as of 8:28 a.m. in Hong Kong, Credit Agricole SA (ACA) prices show. The gauge has increased from a 14-month low of 112.6 on Sept. 19, according to CMA pricing on Series 17 of the index.
The Markit iTraxx Japan index advanced 1 basis point to 219 as of 9:27 a.m. in Tokyo, Deutsche Bank AG prices show. The measure is set for its highest close since October last year, according to CMA pricing for the previous series.
The Markit iTraxx Australia Series 18 index was little changed at 155 basis points as of 10:28 a.m. in Sydney, according to Credit Agricole. The benchmark has ranged between 135.3 and 186 this quarter, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.
New versions of the benchmarks are created every six months when companies are added or dropped depending on their ratings, the cost of protecting their debt and the ease of trading their swaps. The maturity date of the new indexes, which started trading Sept. 20, is December 2017, compared with June 2017 on the Series 17 versions.
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.