Shun Tak Holdings Ltd. is marketing dollar-denominated bonds amid a 72 percent decline of issuance in the Asia-Pacific region this month. Bond risk fell.
Shun Tak, controlled by the family of gambling mogul Stanley Ho, is considering offering the seven-year bonds at around 6 percent, a person familiar with the deal said. This would be the first benchmark offering in the U.S. currency for the Hong Kong-based ferry operator and property developer, according to data compiled by Bloomberg. Dollar bond sales in the region have fallen to $10.5 billion from January, the data show.
Sales are retreating from a record $37.3 billion last month, while corporate bond offerings worldwide are on pace for the slowest February since 2008 with the prospect of rising interest rates in the U.S. and persistent recession in Europe. The Markit iTraxx Asia index, a measure of bond risk for 40 investment-grade borrowers outside Japan, is headed for its biggest monthly decline since October, according to CMA.
“Supply volumes have fallen in February due to a combination of factors,” said Michele Barlow, Hong Kong-based head of Asia-Pacific credit and convertible bonds research at Bank of America Corp. The Chinese New Year holiday, a rise in treasury volatility, the weak performance of a number of the January new issues and the start of earnings season have limited debt offerings, Barlow said.
Global bond sales fell to $218.4 billion this month, a 49 percent decline from January, amid concern borrowing costs may rise as the Federal Reserve signals it may wean the economy off stimulus measures. Meanwhile, the European Commission is forecasting the euro area will shrink for a second year.
Minutes of the Federal Reserve’s January meeting released on Feb. 20 showed several policy makers said the U.S. central bank should be ready to vary the pace of its $85 billion in monthly bond purchases.
Asia’s dollar corporate bonds returned 0.6 percent this year, compared with a 3.9 percent gain in the same period in 2012, according to Bank of America Merrill Lynch indexes.
Shun Tak last offered dollar debt in July 1999, when its unit sold $70 million of convertible bonds, data compiled by Bloomberg show.
The Markit iTraxx Asia index fell 2 basis points to 107 as of 8:36 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The gauge is on course to decrease 9.2 basis points in February, the biggest monthly drop since the 17.7 decline in October, according to data provider CMA.
The Markit iTraxx Australia index slid 3.5 basis points to 114 basis points as of 10:29 a.m. in Sydney, Westpac Banking Corp. prices show. The benchmark, which has ranged from 110.2 basis points to 127.5 this year, is set to fall 5.5 basis points this month, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.
The Markit iTraxx Japan index dropped 2 basis points to 125 basis points as of 9:11 a.m. in Tokyo, according to Deutsche Bank AG prices. The measure, which started the year at 148.1, is poised for a 10.2 basis-point decline this month, 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.