CDB Offers Dollar Debt as Costs Fall to Least Since January 2011

CDB Offers Dollar Debt as Costs Fall to Least Since January 2011
The headquarters of the China Development Bank stands in Beijing, China. Photographer: Nelson Ching/Bloomberg

China Development Bank Corp. is marketing a sale of dollar-denominated bonds as the cost of borrowing in the U.S. currency falls to the lowest in almost two years for Chinese companies.

CDB, the nation’s largest policy lender, plans to sell five-year notes at about 175 basis points more than similar-maturity Treasuries and 10-year securities at about a 200 basis-point spread, according to a person familiar with the matter. The extra yield Chinese companies offer investors to buy their dollar bonds rather than government debt fell to 374 basis points yesterday, the least since January 2011, JPMorgan Chase & Co. indexes show.

“China risk appetite is returning to the market as recent data is pointing to a more benign outlook for growth” in the country, said Krishna Hegde, the Singapore-based head of Asia credit research at Barclays Plc. “For credit markets in general, all-in yields are close to multiyear lows, making it attractive for borrowers.”

Chinese industrial companies’ profit gains surged in October and turned positive for the year as factory output accelerated and export growth picked up following a seven-quarter economic slowdown, according to National Bureau of Statistics figures today in Beijing. Industrial production and overseas shipments both rose last month by the most since May. China Cosco Holdings Co. raised $1 billion this week, boosting dollar sales by Chinese corporates to $4.5 billion in November, the most for any month since April, according to data compiled by Bloomberg.

Cosco, Longyuan

China Cosco sold 4 percent bonds due December 2022 at a spread of 250 basis points over Treasuries, data compiled by Bloomberg show. Companies in the world’s second-largest economy have sold 35 percent of all dollar notes in the Asia-Pacific region this month, up from 18 percent in October, the data show.

CDB will sell its notes via Amber Circle Funding Ltd., a person familiar with the matter said today, asking not to be identified because the terms aren’t set. Proceeds will be used by the offshore business of CDB Leasing, a subsidiary of the company, another person said on Nov. 20.

China Longyuan Power Group Corp. hired Goldman Sachs Group Inc., Morgan Stanley and UBS AG to help arrange meetings with bond investors, another person said today.

Credit Risk

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was little changed at 113 basis points as of 8:57 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The gauge has ranged from 112.6 basis points to 175.3 basis points this half, according to data provider CMA.

The Markit iTraxx Japan index fell 1 basis point to 176 as of 9:04 a.m. in Tokyo, Deutsche Bank AG prices show. The index, which has ranged from 168.5 to 229.5 since June 30, is headed for its first decline since Nov. 22, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Australia index increased 1 basis point to 133 basis points as of 10:52 a.m. in Sydney, according to Westpac Banking Corp. The measure, which has ranged from 132.4 to 186 this half, is headed for a 21 basis-point decline from this month’s high of 154 on Nov. 16, according to CMA.

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. A basis point is 0.01 percentage point.

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