Yuzhou Properties Co. is marketing U.S. dollar-denominated bonds as offerings by companies in Asia outside Japan rise to a three-month high this week.
The Chinese builder, which according to its website is the biggest developer in the coastal city of Xiamen, is offering five-year notes to yield about 8.875 percent, a person familiar with the matter said, asking not to be identified because the matter is private. Regional corporate bond sales in the U.S. currency total $5.8 billion this week, the highest since the five days ended Oct. 11, data compiled by Bloomberg show.
Companies in Asia are seeking to secure financing ahead of the U.S. Federal Reserve’s plans to dial back its bond-buying program, which investors speculate could lead to higher Treasury yields. Ten-year benchmark yields rose by 127 basis points last year, the most since 2009. Borrowing costs for dollars in Asia average 5.54 percent and have increased for the past two months, JPMorgan Chase & Co. indexes show.
“From a pure cost analysis point of view it is going to remain significantly cheaper for Chinese companies to raise funding in dollars versus yuan as the onshore money market in China remains tight,” said Thomas Drissner, a Singapore-based credit analyst at Aberdeen Asset Management Asia Ltd. “We therefore expect a large number of new names to tap the dollar debt market this year.”
Top-rated five-year corporate bonds in China yield 6.23 percent. Costs reached 6.31 percent on Jan. 6, the highest on record as money supply in the world’s second-biggest economy tightens.
Chinese and Hong Kong-based borrowers sold a record 55.7 percent of Asian offerings denominated in dollars last year, according to data compiled by Bloomberg. China Shipping Group Co., the nation’s No. 2 shipping company by assets, is considering selling U.S. currency bonds for the first time, a person familiar with that matter said on Jan. 15, while developers China Overseas Grand Oceans Group Ltd. and Shimao Property Holdings Ltd. sold a combined $1 billion of debentures this week.
The cost of insuring corporate and sovereign bonds against non-payment in Asia rose today, according to traders of credit-default swaps.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan increased 2 basis points to 140 basis points as of 8:31 a.m. in Hong Kong, Australia & New Zealand Banking Group Ltd. prices show. The gauge is set to rise for the first time in three days, according to data provider CMA.
The Markit iTraxx Japan index climbed 0.5 basis point to 75.8, according to Citigroup Inc. prices as of 9:14 a.m. in Tokyo. The measure touched 78.7 basis points on Jan. 14, the highest since Dec. 6, 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 slid 1 basis point to 99.5 basis points as of 11:12 a.m. in Sydney, National Australia Bank Ltd. prices show. The benchmark is on track for a 1 basis-point decline this week after increasing for the past two consecutive weeks, CMA data show.
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.