Poly Real Estate’s Debt Falls in Trading as Asia Bond Risk Rises

Bonds sold by Poly Real Estate Group Co. (600048), the first U.S. dollar-denominated notes from a Chinese issuer in almost eight weeks, fell in their first day of trading. Asia bond risk climbed.

The Guangzhou-based developer sold $500 million of five-year bonds at 99.061 cents on the dollar yesterday, data compiled by Bloomberg show. The securities were quoted as low as 98.529 cents on the dollar today before rallying to 98.98 as of 10:36 a.m. in Hong Kong, according to Royal Bank of Scotland Group Plc prices.

The cost of insuring corporate and sovereign bonds in the Asia-Pacific region using credit-default swaps climbed today as warnings China could miss its 7.5 percent yearly growth target intensify. Expansion trailed 2013 targets in 17 of 30 provinces and provincial-level cities in the January-to-June period, compared with 14 of 31 in last year’s first half, according to data compiled by Bloomberg News.

“Despite the early weakness, this deal is hardly a disaster,” said Mark Reade, a Hong Kong-based analyst at Credit Agricole CIB. “Maybe this will just take some time to digest.”

Poly Real Estate’s sale was the first by a Chinese company in the U.S. currency since China Huaneng Group Corp. raised debt on June 4, data compiled by Bloomberg show. Investors offered to buy more than three times the number of notes available in the offering yesterday.

Bond Risk

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan climbed 3 basis points to 146 basis points as of 8:18 a.m. in Singapore, Westpac Banking Corp. (WBC) prices show. The benchmark is headed for its highest close since July 12 and is down from 152.4 basis points at the start of the month, according to data provider CMA.

The Markit iTraxx Australia index rose 3 basis points to 123 as of 10:19 a.m. in Sydney, according to National Australia Bank Ltd. prices. The measure is on track to close at its highest level since July 17, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market. It’s poised to have fallen 14.1 basis points from June 30 and has ranged from 96.1 to 149.5 this year, CMA prices show.

The Markit iTraxx Japan increased 1 basis point to 102 basis points as of 9:19 a.m. in Tokyo, according to Citigroup Inc. The gauge, which has ranged from 90.9 to 110.2 this month, is poised for its highest close since July 10, CMA prices 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.

To contact the reporter on this story: Rachel Evans in Hong Kong at revans43@bloomberg.net

To contact the editor responsible for this story: Katrina Nicholas at knicholas2@bloomberg.net

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