BOC Aviation Pte, Bank of China Ltd. (3988)’s aircraft-leasing unit, is marketing its debut U.S. dollar-denominated debt as yields hold near the lowest since 2010. Asia bond risk headed for a fourth monthly decline.
BOC Aviation is offering five-year notes yielding about 250 basis points more than Treasuries, according to a person familiar with the matter. China Resources Cement Holdings Ltd. (1313) is marketing five-year notes at a premium of about 170 basis points, another person said. Yields on Chinese company bonds in dollars were last at 5.43 percent after dropping to 5.29 percent on Sept. 19, the lowest since November 2010, according to JPMorgan Chase & Co. indexes.
Perceptions of Asian corporate creditworthiness improved this month and dollar bond sales from the region surged as central banks pumped cash into the world’s biggest economies. Prospects that China may step up measures to support growth drove a rebound in stock markets today, after sentiment worsened earlier this week amid concern about a global slowdown and violent protests in Spain against austerity measures.
“The all-in funding costs for lots of high-grade issuers still make sense for them to tap the market,” said Keith Chan, Hong Kong-based credit analyst at HSBC Holdings Plc. “So far this week it is mostly the high-grade issuers that have managed to come to the market, as the market backdrop is still a bit weak.”
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 1 basis point to 143 as of 9:16 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The gauge dropped 10 basis points this month, extending declines this quarter to 27 and this year to 63, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.
China Resources Cement hired DBS Group Holdings Ltd. to manage its offering, the person familiar with the matter said.
Shares of the state-backed company jumped 30 percent to HK$4.43 as of 1:15 p.m. in Hong Kong, from this year’s low of HK$3.41 reached Aug. 30, as cement prices increased. The prices rose by as much as 20 yuan ($3.17) last week in the eastern provinces of Anhui, Jiangsu and Zhejiang, Mick Mi, a Shanghai- based analyst at UBS Securities Co., wrote in a Sept. 19 report.
BOC Aviation’s debt sale is being managed by Citigroup Inc., HSBC Holdings Plc and BOC International Holdings Ltd., the person familiar with that offering said. The company set up a $2 billion Euro Medium Term Note program to fund new capital expenditure and general corporate purposes, it said Sept. 20. Bank of China bought the aircraft lessor in December 2006.
Completed dollar sales from the Asia-Pacific region have dropped to $4.6 billion this week from $5.4 billion in the same period of last week, data compiled by Bloomberg show.
“The QE3 euphoria seems to have cooled off a little,” said Luke Garner, co-head of high yield debt capital markets in Asia ex-Japan for JPMorgan in Hong Kong. “In Asia, market sentiment has waned in the last day or so, but for names that are of good credit quality and with good credit stories as well as existing issuers, the market remains open.”
The cost of insuring corporate bonds from non-payment in Japan rose to the highest in almost a year today.
The Markit iTraxx Japan index climbed 2.5 basis points to 231 basis points as of 9:23 a.m. in Tokyo, Citigroup prices show. The measure advanced 20 basis points so far this month, set for the highest close since Oct. 5, according to data provider CMA. The gauge is 53 basis points higher this quarter, extending the increase this year to 44, CMA data show.
The Markit iTraxx Australia index was unchanged at 164 basis points as of 10:26 a.m. in Sydney, Credit Agricole SA (ACA) prices show. The benchmark has fallen 5.5 basis points this month, contributing to a 22 basis-point drop since June 30 and a 16.5 decline since the start of the year, CMA data show.
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.