Korea Gas Corp. is offering dollar-denominated bonds after the biggest two-week yield rally in a year helped lower borrowing costs for Asian companies.
The world’s largest buyer of liquefied natural gas plans to price five-year notes today at about 190 basis points more than similar-maturity Treasuries, according to a person familiar with the offering, who declined to be named because the terms aren’t set. Average yields on corporate dollar bonds in Asia fell 19 basis points to 5.525 percent on July 19 from two weeks earlier, the biggest such decline since the period ended July 13 last year, JPMorgan Chase & Co. indexes show.
Credit-default swaps around the region are dropping while the market for new issues thaws after the U.S. central bank calmed concerns about rising bond yields and the outlook for a reduction in unprecedented stimulus. Dollar bonds from Korea, Asia’s fourth-largest economy, have gained for three straight weeks, the JPMorgan index data show.
“Korean paper has rallied recently,” said Kim Jin Ha, the Seoul-based head of global fixed income at Mirae Asset Global Investments Co. “As long as they give better value than secondary-market issues, there will be demand” for top-notch names, he said.
Indonesia’s PT Multipolar Corp. sold $200 million of bonds last week, while Indian Oil Corp. hired three banks to arrange meetings with global investors. MagnaChip Semiconductor Corp., a Korean electrical components maker, sold $225 million of junk bonds on July 15.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 1 basis point to 128 basis points as of 9:07 a.m. in Hong Kong, Deutsche Bank AG prices show. The benchmark has plunged 24.4 basis points this month, according to Deutsche Bank and data provider CMA.
The Markit iTraxx Japan index fell 2 basis points to 90.5 basis points as of 9:09 a.m. in Tokyo, according to Citigroup Inc. prices. The benchmark is set for the lowest close since May 28, 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 declined 4 basis points to 115 basis points as of 9:43 a.m. in Sydney, National Australia Bank Ltd. prices show. The gauge has fallen 34.5 points from its highest level this year reached on June 24, according to CMA.
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.