Far East Horizon Ltd. is marketing a sale of dollar-denominated bonds as the cost for Asian issuers to borrow in the U.S. currency slips to the lowest in a month.
The Hong Kong-listed company, which provides financial services to industries including healthcare and education, plans to sell $300 million of three-year bonds as soon as today, a person familiar with the matter said, asking not to be identified because the terms aren’t set. Hyundai Capital Services Inc. hired banks to arrange investor meetings in Asia, Europe and the U.S. next week, a separate person said.
Challenges to borrowing onshore and lower yields in the dollar-bond market will encourage Chinese companies to offer U.S.-currency debt, according to Morgan Stanley. Yield premiums on bonds sold by Asian issuers outside Japan slid to 272.4 basis points yesterday, the least since Jan. 23, according to JPMorgan Chase & Co. indexes. The debt yields 5.14 percent, or 59 basis points less than top-rated Chinese borrowers pay for five-year notes onshore, JPMorgan and Chinabond indexes show.
“Asian banks are tightening lending standards and financial conditions on borrowers so corporates have a lot of incentive to diversify their funding or just find lower funding costs,” said Viktor Hjort, a Hong Kong-based managing director in Morgan Stanley’s research team. “The U.S. dollar bond market is probably going to tick both of those boxes at this point.”
Far East Horizon is offering its bonds at about 415 basis points more than three-year Treasuries, the person with knowledge of the details said. Hyundai Capital will consider a debt sale after its meeting, another person said.
The cost of insuring Asian 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 added 1 basis point to 136 basis points as of 8:23 a.m. in Singapore, Westpac Banking Corp. prices show. The gauge has ranged from 129.3 basis points to 153.5 basis points this year, according to data provider CMA.
The Markit iTraxx Australia index was little changed at 100.8 basis points as of 11:20 a.m. in Sydney, according to Australia & New Zealand Banking Group Ltd. The index was last lower on Feb. 18, 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 was also little changed at 75.5 as of 9:21 a.m. in Tokyo, Citigroup Inc. prices show. The benchmark fell for five consecutive days through yesterday, 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.