CLP Holdings Ltd. (2), Hong Kong’s largest electricity supplier, Ratchaburi Electricity Generating Holding Pcl (RATCH) and State Grid Corp. of China are offering dollar-denominated debt as utility bonds have the best start to the year in more than a decade.
CLP is marketing a debut sale of perpetual securities at about 4.375 percent, a person familiar with the matter said. Thai power plant operator Ratchaburi is offering its first dollar bond, according to data compiled by Bloomberg. State Grid, China’s biggest power distributor, plans to sell five-, 10- and 30-year notes, a separate person said.
Investors are channeling money into sectors that can weather slower economic growth, with utilities funds attracting “solid” inflows in the six days ended April 15, according to data provider EPFR Global. Utility companies’ dollar bonds gained 5.65 percent this year through April 25, the biggest returns since the same period of 2003, according to Bank of America Merrill Lynch indexes.
“Utilities are as defensive as you get in credit,” said Viktor Hjort, the Hong Kong-based head of Asia fixed-income research at Morgan Stanley. “The story of the large amount of supply over the past few days is really one of corporates needing new sources of funds, rather than it necessarily reflecting a particularly bullish appetite among Asian investors,” he said, referring to the broader market. Asian issuers raised $10.1 billion of dollar debt last week, data compiled by Bloomberg show.
CLP plans to sell the notes through unit CLP Power HK Finance Ltd. as soon as today, the person with knowledge of the details said, asking not to be identified because the terms aren’t set.
Bangkok-based Ratchaburi is marketing five-year securities at about 190 basis points more than Treasuries, a person familiar with the matter said.
State Grid plans to sell five-year debt at about 130 basis points more than U.S. government debt, 10-year securities at about 165 basis points more than the benchmark and 30-year bonds at about a 155 basis-point spread, another person said.
SMC Global Power Holdings Corp., a unit of the Philippines’ San Miguel Corp., finishes investor meetings in London today regarding a possible dollar sale, a person familiar with that offering said today.
Korea Land & Housing Corp. is also offering debt in the U.S. currency and plans to sell a 3.25-year bond at about 125 basis points more than three-year Treasuries, another person said.
The cost of insuring Asia-Pacific corporate and sovereign bonds from default increased today, according to traders of credit-default swaps.
The Markit iTraxx Australia index advanced 2.5 basis points from its April 24 close to 100 basis points as of 10:31 a.m. in Sydney, according to Citigroup Inc. The benchmark is poised to close at its highest level since March 31, according to data provider CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market. Australian markets closed for a national holiday April 25.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan gained 1 basis point to 127.5 basis points as of 8:38 a.m. in Hong Kong, Australia & New Zealand Banking Group Ltd. prices show. The measure is rising for a third day, the longest streak of increases since the period ended Feb. 20, according to CMA.
The Markit iTraxx Japan index rose 1.5 basis points to 86.5 as of 9:31 a.m. in Tokyo, Citigroup prices show. The gauge is on track to close at its highest since April 15, according to CMA.
Credit-default swap indexes are benchmarks for protecting 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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