Asia Dollar Bond Sales Busiest Since May as Credit Risk Retreats
Country Garden Holdings Co. (2007), a Chinese developer, and Korea Hydro & Nuclear Power Co. are marketing U.S. dollar-denominated bonds as default risk in Asia falls for the first time in almost a week.
Issuers in Asia outside Japan have sold $9.9 billion of notes in September, already the busiest month since May, when $17.6 billion was borrowed. Country Garden, controlled by China’s richest woman, is offering 2021 debentures at a yield of about 7.75 percent, a person familiar with the matter said. Korea Hydro is marketing five-year debt at an about 170 basis-point spread over Treasuries, another person said.
Borrowers are returning to the debt-capital markets after the quietest August since 2011 following news the Federal Reserve will refrain from cutting its $85 billion-a-month in asset purchases. Asian dollar bond yields averaged 5.35 percent yesterday, close to a six-week low of 5.29 percent reached on Sept. 19, the day after the Fed’s decision, JPMorgan Chase & Co. indexes show. Yields fell 22 basis points that day, the most since March 2009.
“Syndicate bankers will be pushing to get as many deals out as possible while the markets are stable,” said Shankar Narayanaswamy, the Singapore-based global head of credit strategy at Standard Chartered Plc. “The Fed’s decision last week caused Treasuries to dip, making it a good time for issuers to price deals at low all-in yields.”
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan dropped 3 basis points to 151 basis points as of 8:35 a.m. in Hong Kong, Australia & New Zealand Banking Group Ltd. (ANZ) prices show. The benchmark last declined on Sept. 19, according to data provider CMA.
Korea Hydro, a unit of Korea Electric Power Corp. (015760), the state-run power monopoly distributor, last sold securities in the U.S. currency in September last year. Those $750 million of 3 percent notes due 2022 were yielding 4.02 percent as of 12:40 p.m. in Hong Kong, according to Bloomberg prices.
Country Garden last visited the market in January, when it raised $750 million selling 10-year 7.5 percent debt, according to data compiled by Bloomberg.
Woori Bank Co. sold $500 million of 2.875 percent 2018 bonds yesterday while Bangkok Bank Pcl (BBL) raised $500 million selling similar-maturity 3.3 percent notes, according to data compiled by Bloomberg. U.S. investors bought 28 percent of Woori’s deal, while European accounts took 17 percent, a person familiar with the matter said today.
The Markit iTraxx Australia index slid 1 basis point to 118 as of 10:22 a.m. in Sydney, according to National Australia Bank Ltd. prices. The gauge is set to snap three consecutive days of increases, according to data from CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.
The Markit iTraxx Japan index dropped 1 basis point to 90.75 basis points as of 9:37 a.m. in Tokyo, according to Citigroup Inc. prices. The measure is also poised for its first decline since Sept. 19, CMA data show.
Credit-default swap indexes are benchmarks for insuring bonds against default. 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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