Asia-Pacific Dollar Bond Sales Slump to 2013 Low as Costs Climb

Dollar-denominated bond sales by Asia-Pacific companies slid to a six-week low as rising costs discouraged issuance before national holidays around the region. Australian debt risk rose.

Australia & New Zealand Banking Group Ltd. led $1.78 billion of sales in the region this week, the least since the period ended Dec. 28, according to data compiled by Bloomberg. The average yield on U.S. currency debt from Asian issuers rose to a more than five-month high of 4.35 percent on Feb. 4, according to JPMorgan Chase & Co. indexes.

The cost of insuring corporate bonds against non-payment in Australia is on track for its fourth weekly increase, according to traders of credit-default swaps. Markets in China, the world’s second-biggest economy, will close for Lunar New Year holidays Feb. 11 through Feb. 15. The festival also shuts markets for part of the week in Hong Kong, Singapore and Malaysia. Japan is closed Feb. 11.

“The recent week is just a pause from the strong issuance of the last month,” said Louisa Lam, a Hong Kong-based credit analyst at HSBC Holdings Plc. “Given the long pipeline, issuance will come back soon after Chinese New Year.”

Lam said yields will rise on new deals slightly, but not significantly, by the end of March.

The Markit iTraxx Australia index advanced one basis point to 119 basis points as of 11:24 a.m. in Sydney, Westpac Banking Corp. prices show.

The Markit iTraxx Japan index climbed one basis point to 125 as of 9:20 a.m. in Tokyo, according to Citigroup Inc. prices. The measure is on track for a ninth consecutive week of decline, according to data provider CMA.

Default Swaps

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was little changed at 115.5 as of 8:23 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The gauge, which started the year at 113.4, lost 92.9 basis points last year, according to CMA, which is owned by McGraw- Hill Cos. and compiles prices quoted by dealers in the private 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: Rachel Evans in Hong Kong at revans43@bloomberg.net

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

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