Companies in Asia refrained from marketing new dollar-denominated bonds today as public holidays and concern the U.S. government will struggle to resolve its debt impasse halted activity.
The pause follows a surge in new bond sales in the U.S. currency last week that saw issuance in Asia outside Japan more than double from the previous five-day period, according to data compiled by Bloomberg. Bond markets in Hong Kong, Japan and the U.S. are closed today.
The average yield premium over Treasuries for Asian dollar bonds fell by nine basis points last week to 291, the first decline since the five days ended Sept. 20, according to JPMorgan Chase & Co. indexes. With the U.S.’s borrowing authority set to lapse Oct. 17, American lawmakers are still seeking to craft agreements that will avert a default and restore full government operations.
“Issuance activity this week will probably be fairly subdued because of all the uncertainty surrounding the U.S. debt ceiling debate,” said Gene Cheon, a Singapore-based director in Deutsche Bank AG’s Asia credit trading business. “With the U.S. and others out for holidays, today’s likely to be particularly quiet for Asian dollar bonds.”
Bond issuance in Asia outside Japan last week rose to $5.9 billion, up from $2.65 billion in the five days to Oct. 4, according to data compiled by Bloomberg. China Petrochemical Corp., Asia’s largest refiner known as Sinopec Group, led offerings, borrowing $2.75 billion on Oct. 9.
SK Broadband Co., a South Korean Internet-service provider, is considering selling a U.S. dollar bond, while China Overseas Land & Investment Ltd. has hired banks to arrange investor meetings, according to people familiar with the matters.
The cost of insuring bonds in Asia against non-payment was little changed from last week, credit default swap prices show.
Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was unchanged at 141 as of 8:44 a.m. in Singapore, Westpac Banking Corp. prices show. The gauge is on track for a 15.4 basis-point decline this month, the most since October last year, 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 decreased 2 basis points to 115 basis points as of 11:34 a.m. in Sydney, according to National Australia Bank Ltd. prices. The benchmark is poised to have fallen 10.2 basis points since Sept. 30, according to data provider 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.