Korea Finance Corp.’s $500 million of U.S. dollar-denominated bonds, its biggest issue in the currency in more than a year, rose after investors offered to buy seven times the available notes yesterday.
The five-year securities, which priced at 99.456 cents on the dollar, were quoted at 99.6 cents as of 11:16 a.m., Royal Bank of Scotland Group Plc prices show. The company paid 145 basis points more than Treasuries to sell the debt, a spread that narrowed to 140 basis points today, according to RBS.
Borrowers from Asia’s fourth-largest economy have accounted for 75 percent of dollar issuance from the region outside Japan this month, data compiled by Bloomberg show. South Korea is forecast to expand 2.5 percent this year, up from 2 percent in 2012. In contrast, China and India are struggling with the slowest growth in at least a decade.
Investors are “looking for names that are reasonably strong,” said Kaushik Rudra, the Singapore-based global head of credit research at Standard Chartered Plc. “There’s still a lack of clarity around a lot of other jurisdictions in Asia, particularly China and India, so Korea is the one major block that doesn’t really have those fundamental issues.”
Investors in the U.S. bought 40 percent of Korea Finance’s bonds, according to a person familiar with the matter. The company received $3.5 billion of orders from 249 accounts, the person said. Chinese electricity generator Meiya Power Co., the last non-Korean issuer to sell dollar debt, by comparison received about $740 million of orders for its $350 million bond sale, a person familiar with the matter said at the time.
The cost of insuring corporate and sovereign bonds from non-payment in the Asia-Pacific region rose, according to credit-default swap traders.
The Markit iTraxx Australia index jumped 5 basis points to 120 basis points as of 10:25 a.m. in Sydney, according to Westpac Banking Corp. (WBC) prices. The benchmark is headed for its biggest one-day gain since July 3 and its highest close since Aug. 2, according to data provider CMA data.
The Markit iTraxx Japan index increased 4 basis points to 96 as of 9:23 a.m. in Tokyo, Citigroup Inc. prices show. The gauge is also poised for its biggest one-day advance since July 3 and its highest level since since Aug. 8, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan climbed 5 basis points to 142 basis points as of 8:26 a.m. in Singapore, Australia & New Zealand Banking Group Ltd. (ANZ) prices show. The measure is on track for its highest close since Aug. 8, CMA data showed.
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.
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