Asian bond risk climbed for the first time in three days after the U.S. pledged to hold Syrian President Bashar al-Assad’s regime responsible for an alleged chemical weapons attack.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan climbed 2 basis points to 161 basis points as of 8:26 a.m. in Hong Kong, Australia & New Zealand Banking Group Ltd. prices show. The gauge is set for its first increase since Aug. 22 after falling from a two-month high, according to data provider CMA.
U.S. Secretary of State John Kerry said yesterday that there is “undeniable” evidence that the Syrian government used chemical weapons in an Aug. 21 attack in a Damascus suburb that opposition groups say killed more than 1,300 people. Kerry said President Barack Obama “believes there must be accountability.” Russia, an Assad ally that has a veto on the UN Security Council, has blocked action against the regime.
“This issue in Syria could be quite large, given the two superpowers involved,” said Charles Macgregor, who tracks Asian high-yield debt as head of Asia at Lucror Analytics Pte. in Singapore. Bond deals “are likely to be held back,” he said.
Asian borrowers sold the least U.S. dollar-denominated notes since mid-July last week, as Korea Development Bank and Franshion Properties China Ltd. raised $450 million, data compiled by Bloomberg show. Indonesia’s government and National Savings Bank of Sri Linka are among borrowers holding bond investor meetings this week, according to data compiled by Bloomberg.
The average yield on Asian dollar debt dropped 6 basis points yesterday to 5.63 percent, according to JPMorgan Chase & Co. It touched 5.72 percent on Aug. 22, the highest level since October 2011.
The Markit iTraxx Japan index rose 1 basis point to 96 as of 9:19 a.m. in Tokyo, according to Citigroup Inc. prices. The measure, which has ranged from 90.9 to 110.2 this quarter, is also on course for its first rise in three 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 increased 1 basis point to 122 basis points as of 10:20 a.m. in Sydney, according to National Australia Bank Ltd. prices. The benchmark, also headed for its first rise since Aug. 22, is set to climb the most in a week, 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 improving 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.