Chinese Builder Tests Junk Demand With Highest Yield in 3 Months

Chinese developer Times Property Holdings Ltd. (1233) is considering pricing a sale of dollar-denominated bonds at the highest yield since November.

The Guangzhou-based company, which has a B+ rating from Standard & Poor’s, the rating assessor’s fourth-highest speculative grade, plans to sell five-year notes at about 13 percent, a person familiar with the matter said. United Overseas Bank Ltd. (UOB) is also offering U.S.-currency debt, marketing Singapore’s first Basel III-compliant Tier 2 bonds, while Hyundai Capital Services Inc. plans to sell three-year floating-rate securities at an about 100 basis-point spread.

Xinyuan Real Estate Co., another B+ rated Chinese builder, was the last company in Asia to price a new issue of notes at 13 percent or more when it issued $200 million of 2019 bonds on Nov. 29, according to data compiled by Bloomberg. Dollar debentures rated lower than BBB- by S&P returned 2 percent globally last month, the most since October, while junk notes sold by Chinese issuers gained 1 percent, Bank of America Merrill Lynch indexes show.

“High-yield appetite at this point is probably very deal specific,” said Viktor Hjort, a Hong Kong-based managing director in Morgan Stanley’s research team. “The market’s far more driven than it was by perceptions of underlying credit risk, which is deteriorating in China right now. The market’s trying to figure out exactly how much downside there is and what the fair compensation is for that.”

Chaori Default

Investors channeled more than $1 billion into U.S. high-yield debt funds in the week ending March 5, according to EPFR Global. Funds continued to flow out of emerging markets, the data show. Shanghai Chaori Solar Energy Science & Technology Co. last week became the first company to default in China’s onshore corporate bond market.

Times Property’s notes, which can be called after three years, are expected to price this week, the person with knowledge of the details said, asking not to be identified because the terms aren’t yet set. The company hasn’t sold dollar bonds before, Bloomberg-compiled data show.

UOB, Singapore’s third-largest lender, plans to sell 10.5-year notes which can be called after 5.5 years at about 250 basis points more than five-year Treasuries. The securities may be sold as soon as today. Hyundai Capital is marketing its bonds at a spread over the three-month London interbank offered rate.

Australia & New Zealand Banking Group Ltd. (ANZ) may also issue bonds in the U.S. currency after holding teleconferences with investors today to discuss a possible subordinated debt sale, another person with knowledge of the details said.

Bond Risk

The cost of insuring corporate bonds from default in Australia and Japan decreased today, according to traders of credit-default swaps.

The Markit iTraxx Australia index slid 0.75 basis point to 102.25 basis points as of 11:36 a.m. in Sydney, according to Citigroup Inc. The index is on course for its lowest close since March 7, according to data provider CMA.

The Markit iTraxx Japan index declined 0.5 basis point to 76 as of 9:34 a.m. in Tokyo, Citigroup prices show. The measure is also on track for its lowest close since March 7, 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 was little changed at 128 basis points as of 8:31 a.m. in Hong Kong, ANZ prices show. The gauge is poised to drop 4 basis points this month, according to CMA.

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 editors responsible for this story: Katrina Nicholas at knicholas2@bloomberg.net Ken McCallum

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