Barclays Offers Subordinated Bonds as Asia Debt Risk Decreases

Barclays Plc is marketing a sale of subordinated dollar-denominated notes as South Korea’s Daegu Bank Ltd. considers issuing in the U.S. currency. Asia-Pacific bond risk fell.

Barclays Bank, a unit of the London-based lender, plans to sell 10-year contingent capital yielding about 7.75 percent, said a person familiar with the matter, who asked not to be identified because the details are private. Daegu Bank has hired banks to arrange investor meetings in Singapore, Hong Kong and London from next week, and an offering may follow, a separate person said.

The cost of insuring corporate and sovereign bonds in the Asia-Pacific region against non-payment fell with gauges of Australian and Asian risk on track for their lowest closes in more than a week, according to traders of credit-default swaps. Hong Kong and China are closed for national holidays tomorrow, with China remaining shut on April 5.

“This week will still be fairly quiet given there’s another holiday coming,” said Angus Hui, a fixed-income fund manager at Schroder Investment Management Ltd. in Hong Kong. Tensions on the Korean peninsula have contributed to somewhat weaker sentiment toward new issuance, he added.

South Korean workers weren’t allowed access to an industrial park jointly run by North Korea for the first time since 2009, Park Soo Jin, a spokeswoman for South Korea’s Unification Ministry said today. North Korea, which has said annual U.S.-South Korea military drills that run until the end of April had brought the region to the brink of war, tested a nuclear weapon in February.

Barclays Bonds

Companies from Asia outside Japan haven’t sold notes in the U.S. currency since March 27, the longest pause since the period ending Feb. 20, according to data compiled by Bloomberg.

Barclays plans to sell its bonds, which can be called after five years, in New York time today, the person with knowledge of the matter said. Investors in the notes will lose all their money if Barclays’ so-called core Tier 1 capital to risk-weighted assets ratio falls below 7 percent.

State Bank of India has meanwhile hired banks to arrange a dollar bond sale, according to a person with knowledge of the matter. Trafigura Beheer BV will meet investors in London and Asia from April 5 to discuss a possible perpetual bond in the U.S. currency, a separate person said.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan retreated 2 to 119 as of 8:32 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The benchmark, which has ranged from 100.5 to 122.3 since Dec. 31, is also on course for the lowest since March 26, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.

Default Swaps

The Markit iTraxx Australia index dropped 3 basis points to 118.5 as of 10:52 a.m. in Sydney, Westpac Banking Corp. prices show. The measure, which declined last quarter for the third consecutive period, is set for its lowest close since March 26, according to data provider CMA.

The Markit iTraxx Japan index decreased 1 basis point to 113 as of 9:29 a.m. in Tokyo, according to Deutsche Bank AG prices. The gauge, which has ranged from 101 to 148.1 this year, is poised for its first decline since March 28, CMA data 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.

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