The cost of insuring Asian corporate and sovereign bonds from non-payment rose ahead of policy decisions by the Federal Reserve and European Central Bank, prompting issuance to stall.
Australia & New Zealand Banking Group Ltd., Export-Import Bank of India and Korea Finance Corp. led dollar offerings, selling $1.75 billion of debt yesterday as yields on Asian debt fell to a 20-month low of 4.34 percent, according to JPMorgan Chase & Co. indexes. Companies are now waiting to see whether the Fed and ECB take further steps to bolster growth in the U.S. and Europe when they meet today and tomorrow.
The global slowdown is weighing on Asian growth, with Chinese manufacturing expanding less than expected in July, government data showed today. “The external environment remains grim,” the official Xinhua News Agency said yesterday, citing a meeting of the Communist Party’s Politburo. South Korea’s exports slid 8.8 percent in July from a year earlier, the steepest decline since September 2009, the country’s Ministry of Knowledge said today, and Australian manufacturing fell to a three-year low, a survey showed.
“Market sentiment is slightly softer after China’s manufacturing data and there’s also significant uncertainty surrounding the key central bank meetings,” Krishna Hegde, head of Asia credit research at Barclays Plc said in a phone interview from Singapore. “If the headlines aren’t negative then issuance will resume. There’s a pipeline of issuers from across the region looking to tap the market.”
The Fed is more likely to wait until September to offer a third round of large-scale asset purchases, according to median estimates of 58 economists in a Bloomberg News survey. The ECB will discuss buying government bonds on the primary market, two central bank officials said on July 27. Rate cuts and long-term loans to banks will also be considered, they said.
China’s Purchasing Managers’ Index fell to 50.1 in July from 50.2 in June, the Beijing-based National Bureau of Statistics and China Federation of Logistics and Purchasing said in a statement today. The reading was the weakest in eight months and compares with a 50.5 median estimate in a Bloomberg News survey. A reading above 50 indicates expansion.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan advanced 1 basis point to 160 basis points as of 8:55 a.m. in Hong Kong, Deutsche Bank AG prices show. The gauge fell 11 basis points last month and has ranged between 132.5 basis points and 210 basis points this year, according to data provider CMA.
Korea Finance sold $500 million of 2.25 percent bonds due 2017 yesterday, attracting more than three- and a half times more orders than the amount of notes available, according to a person familiar with the matter who asked not to be identified because the details are private.
India’s Exim Bank sold its first dollar bonds in more than a year, raising $500 million from a sale of five-year debt while ANZ offered $750 million of ten-year subordinated securities, data compiled by Bloomberg shows.
The Markit iTraxx Australia index increased 3 basis points to 170 as of 10:59 a.m. in Sydney, Westpac Banking Corp. prices show. The measure dropped 19 basis points in July, its biggest monthly decline since January, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market. The Markit iTraxx Japan index rose 2 basis points to 184 basis points as of 9:49 a.m. in Tokyo, Citigroup Inc. prices show.
Credit-default swap indexes are benchmarks for insuring bonds against default and traders use them to speculate on credit quality. An increase signals declining perceptions of creditworthiness. The contracts pay the buyer face value in exchange for the underlying securities if a borrower fails to meet its debt agreements. A basis point is 0.01 percentage point.