China Huaneng Group Corp. is marketing U.S. dollar-denominated bonds after borrowing costs for companies in Asia outside of Japan climbed to the highest in almost 11 months.
The state-owned power generator is offering five-year notes at about 245 basis points more than Treasuries, a person familiar with the matter said today. China Longyuan Power Group Corp. and Hilong Holding Ltd. may also sell dollar bonds. The average yield on debt by issuers in the region rose to 5.08 percent yesterday, a level unseen since July 12, according to JPMorgan Chase & Co. index data.
Bond costs for Asian borrowers have increased as yields on U.S. Treasuries trade near the highest in more than a year amid speculation there is enough improvement in the world’s biggest economy to allow the Federal Reserve to consider tapering stimulus. A report this week may show U.S. employers boosted payrolls in May at the fastest pace in three months, according to economist forecasts compiled by Bloomberg.
“The recent rise in U.S. Treasury yields has Asian credit markets on edge, with most investors content to stay on the sidelines until we get some clarity on U.S. nonfarm payrolls,” said Mark Reade, a Hong Kong-based credit analyst at Credit Agricole CIB.
Hilong hired Deutsche Bank AG and HSBC Holdings Plc to help manage a possible offering, according to a statement to the stock exchange today. The Shanghai-based company plans to use the proceeds to repay bank debt, expand capacity at its coating materials and oilfield services operations, and for general corporate purposes, it said.
The maker of oilfield equipment will meet investors in Hong Kong, Singapore and London starting tomorrow, a person familiar with the matter said, asking not to be identified because the details are private. Fitch Ratings assigned an expected BB score to the company’s proposed bonds, two steps below investment grade, according to an e-mailed statement today.
China Longyuan, the nation’s biggest wind-farm developer, is planning to meet investors in Hong Kong and Singapore from tomorrow, according to a separate person familiar with the matter. The company may sell three-year dollar securities through its unit Hero Asia Investment Ltd. after the meetings, the person said, asking not to be identified because the terms aren’t set.
The cost of insuring corporate and sovereign bonds against non-payment fell in Asia, according to credit-default swap traders.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan decreased 2 basis points to 120 basis points as of 8:28 a.m. in Singapore, Australia & New Zealand Banking Group Ltd. prices show. The measure is set for its first drop since May 28 and its lowest close since May 31, according to data provider CMA.
The Markit iTraxx Japan declined 8 basis point to 92 as of 4:08 p.m. in Tokyo, Citigroup Inc. prices show. The gauge, which advanced last month for the first time since September, is set for its first drop in five business days, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.
The Markit iTraxx Australia index climbed 0.5 of a basis point to 116.5 basis points as of 10:05 a.m. in Sydney, Westpac Banking Corp. prices show. The benchmark has ranged from 96.1 to 127.5 this year, CMA data show.
Credit-default swap indexes are benchmarks for insuring bonds against default and traders use them to speculate on credit quality. An increase signals deteriorating perceptions of creditworthiness, while a drop 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.