Borrowers in Asia outside of Japan paused sales of U.S. dollar-denominated bonds after issuance quadrupled in March. Debt risk in the region rose, poised to close at the highest level in more than four months.
Offerings surged to $17.6 billion last month from $4.4 billion in February as monthly borrowing costs averaged 3.59 percent, the least since January, according to HSBC Holdings Plc indexes and data compiled by Bloomberg. 1Malaysia Development Bhd., Taiwan Semiconductor Manufacturing Co. and Bharti Airtel Ltd. led $45.4 billion of sales in the region since Dec. 31, making the first three months of 2013 the busiest quarter on record, the data show.
Markets in Australia, New Zealand and Hong Kong, home to one of Asia’s largest bourses, are closed for Easter today. Notes denominated in the U.S. currency sold by companies in Asia returned 1.04 percent last quarter, the least since the three months ending Sept. 30, 2011 when they lost 4.57 percent, Bank of America Merrill Lynch indexes show.
“Bond performance was lackluster this quarter partly due to a record amount of issuance,” said Krishna Hegde, the Singapore-based head of Asia credit research at Barclays Plc. “Credit market activity should be muted today with Hong Kong and London away.”
1Malaysia Development, the state investment company also known as 1MDB, sold $3 billion of bonds on March 19, according to a person with knowledge of the transaction. 1MDB is developing an $8 billion financial district in Kuala Lumpur called the Tun Razak Exchange development.
Taiwan Semiconductor Manufacturing issued $1.5 billion of securities in a two-part sale last week. Its $1.15 billion of 1.625 percent notes due 2018 were yielding 1.712 percent as of 10:50 a.m. in Singapore, Royal Bank of Scotland Group Plc prices on Bloomberg show.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan climbed 1.5 basis points to 122.5 basis points as of 8:26 a.m. in Hong Kong, RBS prices show. The benchmark, which ranged from 100.5 to 122.3 in the first three months of the year, is poised for its highest close since Nov. 16, according to data provider CMA.
The Markit iTraxx Japan index was little changed at 113 basis points as of 9:58 a.m. in Tokyo, according to Deutsche Bank AG prices. The gauge has tumbled 46 basis points so far this year, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.
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.