China Petrochemical Corp., Asia’s largest refiner, and Franshion Properties China Ltd. are marketing U.S. dollar-denominated bonds as Asian issuers head for the busiest start to a month since May.
Property developer Franshion, controlled by Sinochem Group, is offering up to $300 million of five-year notes at a yield of about 5.625 percent, according to a person familiar with the matter. China Petrochemical, known as Sinopec, is considering selling 5-, 10- and 30-year notes at respective premiums of 150, 205 and 200 basis points above equivalent maturity Treasuries, said another person.
Asian borrowers outside Japan have already raised $2.6 billion this month, the most since $5.18 billion was raised during the same period in May, according to data compiled by Bloomberg. Other potential issuers may be awaiting the outcome of negotiations in Washington to avert a U.S. government default, said Thomas Drissner, a credit analyst at Aberdeen Asset Management Plc, which managed $312 billion as of Aug. 31.
“Chinese issuers are leading sales as their demand for offshore funding of companies is still high,” said Drissner, who is based in Singapore. “Our mid- to long-term view is that the drivers for the Asian dollar-credit markets remain intact. In the short term, corporate treasurers seem to be taking the view that waiting for a potential relief rally once the threat of a U.S. default is out of the way might well pay out.”
Borrowing costs for Chinese companies, which account for more than half of this month’s issuance, fell to 6.139 percent on Oct. 8, close to an eight-week low of 6.136 percent on Sept. 19, according to JPMorgan Chase & Co. indexes.
Franshion sold $200 million of debentures due 2022 on Aug. 21. That note was trading at a yield of 6.395 percent yesterday, according to Bloomberg prices. Sinochem, which is providing a letter of support for the bonds being marketed today, is China’s biggest supplier of chemical products.
Sinopec raised $3.5 billion in four maturities in April this year. The company sold three-year debt at a spread of 100 basis points more than Treasuries, a five-year at an extra yield of 120, a 10-year piece for a spread of 150 and a 30-year for a 140 basis point spread.
China Properties Group Ltd., another builder, sold $150 million of 13.5 percent securities yesterday.
The cost of insuring Asia-Pacific corporate and sovereign bonds from default rose, according to traders of credit-default swaps.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan increased 3 basis points to 153 basis points as of 8:33 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The gauge is set for its highest close since Oct. 2, according to data provider CMA.
The Markit iTraxx Australia index advanced 1 basis point to 123 basis points as of 11:25 a.m. in Sydney, according to Westpac Banking Corp. The benchmark is poised for its highest level since Oct. 1, 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 rose 1 basis point to 96.5 as of 9:33 a.m. in Tokyo, Deutsche Bank AG prices show. The measure is on track for its highest close since Sept. 30, according to CMA.
Credit-default swap 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.