Mizuho Financial Group Inc. (8411) is marketing a sale of dollar-denominated bonds after Treasury yields gained the most in more than two years on U.S. interest rate expectations.
Mizuho, Japan’s third-largest bank, is offering 10-year subordinated notes, a person familiar with the matter said today, asking not to be identified because the terms aren’t set. The bank’s sale would be the first Basel III-compliant bond from a Japanese issuer, Fitch Ratings Ltd. said March 13. Yields on two-year U.S. government debt rose as much as 10 basis points yesterday, the most since June 2011.
U.S. interest rates may start to rise “around six months” after the Federal Reserve halts bond purchases introduced to stimulate growth, Chair Janet Yellen said yesterday. The central bank is expected to announce the program’s end at its October meeting, according to analysts surveyed by Bloomberg News this month. China, the world’s second-largest economy, announced new measures to support its growth last night.
“Market sentiment in Asia credit has been dominated more by what’s happening in China than the U.S. rates market,” said Krishna Hegde, Barclays Plc’s Singapore-based head of Asia credit research. “Now that the FOMC decision is behind us we have some clarity with regards to the broad direction of rates. We could see some issuance come though from the non-China segment.”
More Fed officials predict the benchmark rate, now close to zero, will rise to at least 1 percent at the end of 2015 and 2.25 percent by the end of the following year, new forecasts show. The central bank will stop linking borrowing costs to a specific unemployment rate, and will instead consider a broad range of indicators.
Costs for corporates from Asia outside Japan jumped 10 basis points to 4.73 percent yesterday, the biggest one-day gain since July 5, Bank of America Merrill Lynch indexes show. China will speed up construction projects after a slowdown in industrial output and investment, the State Council, or cabinet, said.
“The concern about China has only increased in recent days,” said Hegde. “Given the recent China activity data, onshore defaults as well as moves in the currency, investors are more concerned now than they were a week or a month ago.”
Mizuho is considering pricing its bonds at 200 basis points to 212.5 basis points more than 10-year Treasuries, the person familiar with the matter said. Minerva Foods, a Brazilian beef producer, plans to meet investors in Asia, Europe, Latin America and the U.S. regarding a dollar perpetual bond, a person with knowledge of the details said today.
The cost of insuring Asian corporate and sovereign bonds from default fell, according to traders of credit-default swaps.
The Markit iTraxx Asia Series 20 index of 40 investment-grade borrowers outside Japan slipped 1 basis point to 132 basis points as of 8:20 a.m. in Hong Kong, according to Westpac Banking Corp. prices.
The gauge is set to fall for a second day, according to data provider CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market. Series 21 of the index began trading at 140, Westpac prices show.
The Markit iTraxx Australia Series 20 index increased 1 basis point to 105.5 as of 11:11 a.m. in Sydney, according to National Australia Bank Ltd. The index last climbed on March 14, according to CMA. Series 21 was at 104.5 basis points, NAB prices show.
The Markit iTraxx Japan Series 20 index added 0.5 of a basis point to 79 as of 9:33 a.m. in Tokyo, Citigroup Inc. prices show. The index fell for each of the past three days, according to CMA. Series 21 is 10 basis points higher than the previous series, Citigroup 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.
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