Wing Lung Bank is marketing dollar-denominated bonds as borrowing costs for Asian issuers in the currency hold near a record low. Debt risk in the Asia-Pacific region rose.
The Hong Kong-based lender, which is owned by China Merchants Bank Co., is offering about $200 million of 10-year subordinated bonds at a yield of about 300 basis points more than Treasuries, said a person familiar with the deal. The notes can be bought back by the company after five years, the person said, asking not to be named as the terms aren’t set.
India’s Power Finance Corp. and Jakarta-based PT Energi Mega Persada are considering dollar bonds, people familiar with the deals said last week. Yields on such notes from Asian borrowers were little changed at 4.007 percent yesterday, within four basis points of a record-low 3.972 percent reached on Oct. 16, according to a JPMorgan Chase & Co. index.
“There are still a lot of deals waiting in the sidelines,” said Frank Huang, head of fixed-income trading at SinoPac Securities Asia Ltd. in Hong Kong. “Borrowers are enjoying the cheapest funding levels in a long time, so it makes sense for them to come to the market before December when deals slow down due to the holidays.”
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan climbed 1.5 basis points to 123 as of 8:03 a.m. in Hong Kong, Credit Agricole SA prices show. The gauge is set for its fifth consecutive day of increases, according to data provider CMA.
The Markit iTraxx Japan index increased 0.5 basis points to 209.5 basis points as of 10:21 a.m. in Tokyo, Citigroup Inc. prices show. The measure, which has ranged from 168.5 basis points to 229.5 basis points since June 30, is set for its highest close since Oct. 17, according to data provider CMA.
The Markit iTraxx Australia index advanced 1 to 143 as of 11:02 a.m. in Sydney, according to Westpac Banking Corp. The benchmark is on course for its highest close since Oct. 16, according to data provider CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.
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. A basis point is 0.01 percentage point.