Vingroup JSC scrapped a sale of bonds in U.S. dollars, citing elevated costs as investors seek to avoid risk ahead of year-end. Asian issuers stayed away from the market for a third day even as bond insurance costs fell.
Vingroup had sought to sell as much as $300 million of five-year notes at a yield of 12 percent to 12.5 percent, Le Thi Thu Thuy, chief executive officer of Vietnam’s biggest property developer, said in an interview today. An index tracking the cost of insuring corporate and sovereign bonds in Asia with credit-default swaps headed for its lowest close since July 2011, according to Credit Agricole SA and CMA.
Dollar bond sales from Asia excluding Japan have dwindled in December, which has seen the lowest monthly issuance for four of the past five full years, according to data compiled by Bloomberg. Still, offerings of $2.25 billion this month, with the last transaction on Dec. 13, are already the most for any December since 2006, the data show.
“Most investors want to close the books right now,” Thuy said. “If we wanted to go ahead before the end of the year, it would be very expensive.”
The Hanoi-based developer may raise money through a stake sale or a loan, Thuy said. A bond sale may still happen in the next 12 months depending on approvals from the country’s central bank and market conditions.
Yield premiums on dollar bonds in Asia rose to 262.9 basis points as of yesterday from a record-low 247.2 basis points on Oct. 19, according to HSBC Holdings Plc indexes.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan decreased 0.5 basis point to 109 basis points as of 9:08 a.m. in Hong Kong, Credit Agricole SA prices show.
The Markit iTraxx Australia index declined 2 basis points to 122 as of 12:07 p.m. in Sydney, according to Westpac Banking Corp. The benchmark is on course for its lowest since August last year, 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 dropped one to 161.25 as of 10:26 a.m. in Tokyo, Deutsche Bank AG prices show. The gauge is set for its lowest close since April 6, CMA prices show.
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.