U.S. dollar-denominated borrowing costs in Asia outside Japan climbed to the highest in almost a year, helping extend a sales drought into a sixth business day. Bond risk in the region was unchanged.
Average yields for Asian companies in dollars climbed to 5.38 percent yesterday, the highest since June 2012, according to JPMorgan Chase & Co. index data. The spread between yields on the region’s corporate bonds and Treasuries widened to an eight-month high of 351 basis points, the data show.
Companies in the region refrained from selling securities as markets in China, Hong Kong, Taiwan and the Philippines closed today for holidays. China Huaneng Group Corp. raised $400 million on June 4 in the most recent offering from the region, Bloomberg-compiled data show.
“There’s massive uncertainty in the markets and too much underlying volatility for new issues,” said Brayan Lai, a Singapore-based analyst in emerging-market credit trading at Jefferies Group LLC. “Yields in Asia are still caught in the tailwind of wider technical pressure.”
The six-day halt in offerings follows a pause in the eight business days ended June 3, data tracked by Bloomberg show. Even with the recent slowdown, borrowers in the region have sold $82.3 billion of dollar bonds in 2013, the busiest first half for any year in figures compiled by Bloomberg since 1999.
The cost of insuring Asia-Pacific corporate and sovereign bonds from default was little changed, according to traders of credit-default swaps.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan held at 141 basis points as of 8:18 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The gauge jumped yesterday to its highest close since Sept. 26, according to data provider CMA.
The Markit iTraxx Australia index was also little changed at 130 basis points as of 10:19 a.m. in Sydney, according to Westpac Banking Corp. prices. It closed at 128.5 basis points yesterday, the highest level since December, 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 remained steady at 101 basis points as of 10:10 a.m. in Tokyo, according to Citigroup Inc.
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.