PT Multipolar, an Indonesian computer retailer, sold dollar-denominated junk bonds days after MagnaChip Semiconductor Corp. priced the first such notes in Asia since May. Regional bond risk fell.
Multipolar, which is rated B+ by Standard & Poor’s, yesterday raised $200 million from a sale of five-year bonds at 9.75 percent, according to data compiled by Bloomberg. MagnaChip, a Korean electrical components maker, sold $225 million of junk bonds on July 15, the first high-yield notes in Asia from a company since May 22, Bloomberg-compiled data show.
The speculative-grade sales come as concern abates that the Federal Reserve will withdraw stimulus too quickly. While that has left a gauge of Asian bond risk poised for its lowest close in six weeks, regional dollar junk yields remain near the high of 7.99 percent marked last month even after falling to 7.5 percent yesterday, according to a JPMorgan Chase & Co. index.
“The primary market may take some time to pick up to more buoyant levels,” said Jerry Gwee, a credit strategist in Singapore at Oversea-Chinese Banking Corp. “Issuers want to print at the yield levels seen earlier this year, but investors are being more selective as the secondary market provided opportunities in the recent correction.”
Multipolar sold 72 percent of its bonds to fund managers, a person familiar with the matter said today, asking not to be identified because the details are private. The notes fell to 98 cents on the dollar as of 10:18 a.m. in Hong Kong, according to prices from DBS Bank Ltd. MagnaChip’s notes were quoted at 99.8 cents today, Bloomberg prices show.
Fed Chairman Ben S. Bernanke said this week that the central bank’s bond purchases aren’t on a preset course and policy makers will respond to data in determining any changes to stimulus measures. Yields had surged last month after he said the U.S. may taper the purchases as early as this quarter if the economy improves as forecast.
The Markit iTraxx Asia index of credit default-swaps for 40 investment-grade borrowers outside Japan slid 4 basis points to 128 basis points as of 8:44 a.m. in Hong Kong, Westpac Banking Corp. prices show. The gauge is set for its lowest close since June 5, according to data provider CMA.
The Markit iTraxx Australia CDS index lost 2 basis points to 117 basis points as of 10:24 a.m. today in Sydney, according to National Australia Bank Ltd. The index is on course for its lowest close since June 4, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.
The Markit iTraxx Japan index fell 1 basis point to 90 as of 9:23 a.m. in Tokyo, Deutsche Bank AG prices show. The index is on track for its lowest close since May 28, according to CMA.
CDS indexes are benchmarks for protecting 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.