Borrowers in Asia outside Japan more than tripled dollar-denominated bond sales this week to lock in borrowing costs amid bets U.S. jobs data will show improvement and prompt the Federal Reserve to further pare stimulus.
Offerings rose to $2.7 billion from $750 million last week as issuers took advantage of the lowest borrowing costs this year, ahead of today’s U.S. non-farm payrolls data for January. The average yield for dollar notes in the region dropped to 5.23 percent on Feb. 3, the lowest since Dec. 11, according to JPMorgan Chase & Co. indexes.
Speculation is mounting the cost to issue dollar debt may rise after U.S. 10-year Treasury yields climbed from almost a three-month low as the Labor Department said initial claims for unemployment benefits declined last week. The payrolls report later today will show that companies added 180,000 workers in January after a 74,000 increase in December, according to the median forecast of economists surveyed by Bloomberg.
“Given where U.S. Treasury yields currently stand, it is still attractive for Asian issuers to try securing long-term funding,” said Luc Froehlich, a Hong Kong-based fixed-income portfolio manager at Manulife Asset Management, which oversees $258 billion in assets globally.
Markets in mainland China opened today after the week-long Lunar New Year holiday.
The cost of insuring corporate and sovereign bonds in the Asia-Pacific region from non-payment fell, according to traders of credit-default swaps.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 5 basis points to 144 basis points as of 8:44 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The gauge is on track for its lowest close since Jan. 29 and a third straight daily drop, the longest streak of declines since the period ended Dec. 11, according to prices from data provider CMA.
The Markit iTraxx Australia index slid 2.5 basis points to 104.5 basis points as of 11:38 a.m. in Sydney, according to Australia & New Zealand Banking Group Ltd. prices. The measure is set for its lowest close since Jan. 28 and a fourth day of declines, 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 decreased 2.5 basis points to 82.8 basis points as of 9:37 a.m. in Tokyo, Citigroup Inc. prices show. The benchmark is poised for its lowest close in a week.
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.