A unit of Melco Crown Entertainment Ltd., the Hong Kong-based casino operator, is marketing a sale of dollar-denominated notes as issuers brave higher costs to sell debt before year-end holidays. Asia-Pacific bond risk rose.
Studio City Finance Ltd. plans to sell $825 million of eight-year bonds at about 8.25 percent, said a person familiar with the matter. The Indonesian sovereign and Export-Import Bank of Korea led almost $2.7 billion of Asian dollar bond sales yesterday, the busiest day in six months, even as concerns about U.S. government finances push up premiums on Asian dollar debt.
“This is the last push from Asian borrowers to get out their bond deals,” said Brayan Lai, a desk analyst in emerging-market credit trading at Jefferies Group Inc. in Singapore. The so-called fiscal cliff in the U.S. is weighing on sentiment meaning investors will probably only invest with serious price concessions, Lai said.
President Barack Obama yesterday warned the world’s biggest economy risks a recession if lawmakers miss a deadline to stop the $607 billion in automatic spending cuts and tax increases scheduled to take effect from January. Spreads on Asian dollar notes have widened 24 basis points to 274 basis points since hitting a 17-month low in October, and are heading for the fourth consecutive week of increases, according to JPMorgan Chase & Co. indexes.
The Markit iTraxx Australia index increased 4.5 basis points to 151 basis points as of 11:31 a.m. in Sydney, according to Westpac Banking Corp. The index is set for its highest close since Oct. 11, according to data provider CMA.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan rose three basis points to 126 as of 8:26 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The index has ranged between 175.3 and 112.6 in the second half of the year, CMA data show.
The Markit iTraxx Japan index climbed two basis points to 206 as of 9:12 a.m. in Tokyo, Deutsche Bank AG prices show. The index had risen 19.9 basis points this year as of yesterday’s close after increasing 85.5 in 2011, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.
The 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.