IDBI Bank Ltd. is marketing a sale of dollar-denominated bonds as debt risk in Asia falls, reversing yesterday’s increase amid easing concern that fallout from a Cyprus bank deposit levy will reach the region.
IDBI Bank, the state-run Indian lender, is offering notes due January 2019 at about 315 basis points more than Treasuries, said a person familiar with the matter, asking not to be identified because the matter is private. The Markit iTraxx Asia index of credit-default swaps on 40 investment-grade borrowers outside Japan fell 3 basis points to 102.5, after climbing 2.5 yesterday, according to traders.
Euro-area finance ministers signaled flexibility on the terms of Cyprus’s rescue, suggesting less-wealthy depositors could be exempted from taxes used to fund a bailout. Filinvest Development Corp., the Manila-based holding company with investments in property and banking, and Indonesia’s Star Energy Geothermal (Wayang Windu) Ltd. are among borrowers planning U.S. currency bonds, people familiar with the deals said.
“Despite the Cyprus-led market volatility, funding conditions for Asian corporates remain attractive,” said Mark Reade, a Hong Kong-based credit desk analyst at Credit Agricole CIB. “Dollar funding costs are still low and global credit investors remain cashed up.”
While average yield premiums on dollar bonds in Asia increased 4 basis points yesterday to 266.7 basis points more than Treasuries, the biggest jump in six weeks, they are down 44 basis points from a year earlier, according to HSBC Holdings Plc indexes.
Banks in Cyprus will be closed until March 21 after finance ministers in the euro area reached an agreement on March 16 forcing depositors to share in the cost of the latest bailout. The levy sparked outrage in the island nation and concern among investors about setting a precedent by breaking the taboo against raiding bank accounts.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 3 basis points to 102.5 basis points as of 9:24 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show.
The Markit iTraxx Australia index dropped 3 basis points to 105.5 as of 11:12 a.m. in Sydney, according to National Australia Bank Ltd. prices. The benchmark is down from the highest close since March 13 yesterday, 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 fell half a basis point to 105.8 basis points as of 9:28 a.m. in Tokyo, according to Citigroup Inc. prices. The gauge yesterday closed at its highest level since March 7, 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.