Parkson Retail Group Ltd. and Citic Securities Co. are among Asian companies marketing dollar-denominated debt as borrowing costs drop in April for the first time in five months. Bond risk in Asia fell.
Parkson Retail, a Chinese department store owner, hired three banks to manage the sale of a five-year bond in the U.S. currency, according to a person familiar with the matter. Citic Securities, China’s largest listed brokerage, and a unit of Sinochem Group, China’s biggest supplier of chemical products, are also marketing dollar notes, separate people said, asking not to be identified because the terms aren’t set.
Costs for borrowers in Asia outside of Japan fell nine basis points this month to 4.69 percent as of yesterday, JPMorgan Chase & Co. indexes show. Average yields are down from this year’s high of 4.81 percent reached in February and are headed for the first monthly decline since November. The rate on benchmark Treasuries dropped this week to the lowest level since December as the Federal Reserve continues asset purchases to support the economy.
“The cost of dollar funding remains low thanks to the promise of quantitative easing from the Federal Reserve,” said Steve Wang, Hong Kong-based head of fixed-income research at BOCI Securities Ltd., a unit of Bank of China Ltd. “In the second half of the year, I am expecting to see more Chinese industrial names come to the market.”
Parkson Retail hired DBS Group Holdings Ltd., JPMorgan and Nomura Holdings Inc. to market Reg S notes at about five percent, said the person familiar with the matter. Citic Securities is offering bonds through its Citic Securities Finance 2013 Co. subsidiary at about 200 basis points more than similar-maturity Treasuries, another person said.
Sinochem is marketing a perpetual bond to yield 5.125 percent to 5.25 percent, a separate person said. The proceeds from the sale will be used for working capital, refinancing short-term loans, capital expenditure and other general corporate purposes, according to the person, who also asked not to be named.
Korea Resources Corp., a state-run minerals explorer, is selling five-year dollar bonds at a spread of about 155 basis points over comparable U.S. government debt, another person familiar with the matter said. The notes are expected to be rated A1 by Moody’s Investors Service and A+ by Standard & Poor’s, the fifth highest rankings, according to the person.
The cost of insuring corporate bonds from non-payment in Japan is headed for the lowest close in three years, according to traders of credit-default swaps.
The Markit iTraxx Japan index slid 1.5 basis points to 87 basis points as of 9:11 a.m. in Tokyo, Deutsche Bank AG prices show. The measure, which has dropped 72 basis points this year, is poised for its lowest close since April 2010, according to data provider CMA.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 1 to 111 as of 8:56 a.m. in Hong Kong, Australia & New Zealand Banking Group Ltd. prices show. The gauge is set for its lowest close since March 19, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.
Markets are closed in Australia for a national holiday.
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.