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Macquarie’s Biggest Dollar Bond in 18 Months Narrows on Deposits

Aug. 8 (Bloomberg) -- Macquarie Bank Ltd.’s biggest U.S. dollar-denominated bond in almost 18 months tightened in Asian trading today as investors shrugged off worse-than-expected employment data to bet on Australian lenders.

The yield premium on $1 billion of notes due August 2016 fell to 140 basis points as of 9:43 a.m. in Hong Kong, after pricing at 143 basis points yesterday, data compiled by Bloomberg show. The average spread on all-currency debt for Australian financial-services companies narrowed 10 basis points this year to 113 yesterday, Bank of America Merrill Lynch index data show.

The country’s lenders have boosted domestic deposits to 55 percent of their funding from 40 percent in 2008, the central bank said in its Financial Stability Review in March. The companies sold 12 percent fewer dollar bonds this year than in the same period in 2008, data compiled by Bloomberg show.

“Australian banks are solidly placed,” said Michael Bush, head of credit research at National Australia Bank Ltd. in Melbourne. “Though there’s still low loan growth, there’s also now a bit less pressure to keep increasing deposits and that will be reflected in medium-term note issuances.”

Australian employers unexpectedly cut payrolls in July and unemployment held at an almost four-year high. The number of people employed fell 10,200, the statistics bureau said in Sydney today. Economists had expected an increase of 5,000. The jobless rate held at 5.7 percent.

Bond Risk

The cost of insuring bonds in the Asia-Pacific region from non-payment increased for a second day, according to credit-default swap traders.

The Markit iTraxx Australia index advanced 1 basis point to 120 as of 10:19 a.m. in Sydney, according to National Australia Bank Ltd. The gauge is also headed for its second daily increase to its highest level this week, according to CMA.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan rose 1 basis point to 145.5 basis points as of 9:09 a.m. in Singapore, Royal Bank of Scotland Group Plc prices show. The benchmark is on course for its highest close since Aug. 2, according to data provider CMA.

The Markit iTraxx Japan index climbed 0.5 of a basis point to 98 as of 10:03 a.m. in Tokyo, Citigroup Inc. prices show. The measure is also poised for its second daily increase and the highest since Aug. 1, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

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.

To contact the reporter on this story: Rachel Evans in Hong Kong at revans43@bloomberg.net

To contact the editor responsible for this story: Katrina Nicholas at knicholas2@bloomberg.net

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