Hainan Airlines Co. is marketing dollar-denominated notes. Debt risk in Asia climbed to a two-month high as bonds sold by Petron Corp., the largest refiner in the Philippines, dropped on their first day of trading.
The Chinese carrier is offering as much as $500 million of seven-year bonds at a premium of about 250 basis points more than Treasuries, a person familiar with the deal said. Petron’s perpetual securities slumped to 96 cents on the dollar as of 9:56 a.m. in Hong Kong after pricing at par yesterday, Royal Bank of Scotland Group Plc prices show. An index of credit-default swaps on Asian bonds climbed three basis points to 114, set for its highest close since Nov. 28, according to Credit Agricole SA prices and data provider CMA.
Average yields on Asian notes in the U.S. currency rose 6 basis points yesterday to 4.2 percent, the highest since September, according to a JPMorgan Chase & Co. index. U.S. Treasuries are heading for their steepest monthly loss in two years, threatening to diminish returns on dollar debt in Asia by pushing up yields.
“There’s been a bit of a sell-off in the secondary market for Asian dollar bonds after U.S. Treasuries traded down in the last 2 days,” said Jeffrey Yap, Hong Kong-based head of Asia fixed-income trading at Mizuho Securities Asia Ltd. “Investors believe that spreads will tighten but are worried that absolute returns are going to be hurt by Treasury yields rising.”
MIE Holdings Corp.’s $200 million of bonds fell to 97.75 cents on the dollar as of 11:34 a.m. in Singapore, driving the yield up to 7.42 percent, RBS prices show. The oil explorer, with fields in China’s Songliao Basin, sold the debt at 6.875 percent, Bloomberg-compiled data show.
Petron sold $500 million of notes that don’t have a set maturity with a 7.5 percent coupon yesterday, according to data compiled by Bloomberg. The securities recouped some of their earlier losses to trade at 99 cents as of 12:39 p.m. in Singapore, according to RBS prices.
The Markit iTraxx Australia index advanced two basis points to 120 as of 10:57 a.m. in Sydney, according to Westpac Banking Corp. prices. The benchmark is poised for the highest close since Jan. 1, 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 climbed three to 137 as of 8:57 a.m. in Tokyo, according to Deutsche Bank AG prices. The measure is headed for the highest level in a week, 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.