Asia Dollar Bond Sales to Decline in 2013, Bank of America Says

Dollar-denominated bond sales in Asia outside of Japan may drop by about 15 percent next year after a record 2012, according to Bank of America Corp. Borrowers paused offerings today ahead of year-end holidays.

Issuance will slow in 2013 as companies have low refinancing requirements, while economic growth is set to pick up only moderately, Bank of America analysts wrote in a report this month. Still, even a 15 percent decline in Asian dollar bond offerings would make 2013 the second-busiest year ever, behind the $121.1 billion raised in the current period, according to data compiled by Bloomberg.

“It’s going to be active again next year,” Alan Schmoll, Hong Kong-based director, Asia-Pacific debt syndicate at Bank of America’s Merrill Lynch unit, said in a phone interview today. “While supply will likely be lower than the record-setting volume of this year, 2013 could still be one of the busiest years on record.”

Investors flocked to debt from the world’s fastest-growing region in 2012, spurring a 15 percent return on Asian corporate bonds in dollars that outpaced the 10 percent gain on company notes globally, Merrill Lynch indexes show. Asia’s economy will expand 6.8 percent in 2013, from a 6.3 percent pace this year, according to strategists surveyed by Bloomberg. Growth averaged 8.1 percent in the five years through 2011.

U.S. currency bond offerings in the region paused for a second business day today as investors and issuers head into the Christmas holiday period. Zoomlion Heavy Industry Science & Technology Co., a Chinese concrete and hoisting machinery maker, raised $600 million selling 6.125 percent notes on Dec. 13 in the only sale last week, Bloomberg-compiled data show.

Dollar Premiums

Yield premiums on dollar bonds in Asia have risen to 265.1 basis points on Dec. 14 from a record-low 247.2 basis points on Oct. 19, according to HSBC Holdings Plc indexes.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was little changed at 109 basis points as of 08:24 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show.

The Markit iTraxx Japan index retreated 2.5 basis points to 161 basis points as of 10:00 a.m. in Tokyo, Citigroup Inc. prices show. The gauge has slid nine basis points over the past week, according to prices from Citigroup and data provider CMA.

The Markit iTraxx Australia index declined 0.5 basis point to 123.5 as of 11:23 a.m in Sydney, according to Westpac Banking Corp. (WBC) The measure has dropped five basis points over the past week, according to Westpac and CMA, which is owned by McGraw- Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

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.

To contact the reporter on this story: Tanya Angerer in Singapore at tangerer@bloomberg.net

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net

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