China South City Holdings Ltd. and Citic Pacific Ltd. are marketing dollar-denominated bonds after yield premiums on notes from Asia tumbled to a 16-month low. Debt risk in the region fell.
China South City, the Hong Kong-based developer and operator of logistics and trade centers, is offering the five- year securities, which are callable after three years, at a yield of about 14.25 percent, according to a person familiar with the deal. Steelmaker Citic Pacific is planning January 2023 bonds yielding about 7.125 percent, a separate person said.
Asian borrowers are returning to the bond market after sales dropped to a two-month low of $300 million last week amid holidays in China, South Korea and Hong Kong. China Tianrui Group Cement Co. is also considering an offering, according to a person familiar with the potential deal. Spreads on Asian dollar debt narrowed to 273 basis points more than Treasuries on Oct. 5, the least since May 20, 2011, HSBC Holdings Plc indexes show.
“In the absence of any material primary issuance last week, secondary spreads moved tighter, which provides a decent backdrop for this week’s new issues,” said Mark Reade, a credit desk analyst at Credit Agricole SA in Hong Kong. “The key will be whether real money investors just focus on the new issues or keep chasing cash in secondary.”
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 1 basis point to 129 as of 8:40 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The benchmark is headed for its lowest close since Sept. 19, according to data provider CMA.
CNP Assurances, the Paris-based insurer, is seeking to sell perpetual subordinated notes, another person familiar with the matter said, asking not to be identified because the terms aren’t set.
China Tianrui may sell dollar bonds after planned meetings with bond investors from tomorrow, which will be arranged by Citigroup Inc. (C) and Deutsche Bank AG, a separate person said.
The Markit iTraxx Australia index slid 2 basis points to 152 basis points as of 11:28 a.m. in Sydney, according to Westpac Banking Corp. The gauge is set for its lowest close since Sept. 19, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.
Markets are closed in Japan for a national holiday.
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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