Chinese borrowers are extending their position as the biggest issuers of dollar-denominated bonds in Asia, as China Construction Bank Corp. offers notes in the currency.
Dollar bonds from Chinese and Hong Kong issuers account for 61 percent of all sales in Asia outside Japan this quarter, up from 47 percent in the previous three months, data compiled by Bloomberg show. State-owned China Construction Bank is selling a five-year note at about 185 basis points more than Treasuries, a person familiar with the matter said, asking not to be identified because the terms aren’t set.
Chinese-based issuers are also the single-largest geographical group in JPMorgan Chase & Co.’s Asia Credit Index, which many investors use as a benchmark, according to a report by Moody’s Investors Service dated June 23. The top 10 Chinese issuers represent 13 percent of the index, which includes 324 companies throughout Asia, reflecting a high degree of concentration, the report shows.
“This is further amplified when taking into account the level of state ownership that exist behind many of the country’s bond issuers,” said Hong Kong-based Moody’s analyst Laura Acres. “The index is even more concentrated when taking into account government-related issuers and banks, whose ratings could change as a direct result of any changes to sovereign debt rating.”
China is rated Aa3 with a stable outlook by the credit rating company.
The cost of insuring corporate bonds against non-payment in Australia declined today, credit-default swap prices show.
The Markit iTraxx Australia index dropped 0.5 of a basis point to 80.5 as of 10:34 a.m. in Sydney, Citigroup Inc. prices show. The benchmark is poised for its lowest close since June 20, CMA data show.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was little changed at 100 basis points as of 8:34 a.m. in Singapore, Australia & New Zealand Banking Group Ltd. prices show. The measure is down 7 basis points this month after a 19.7 basis point drop in May, the biggest monthly decline since February, according to data provider CMA.
The Markit iTraxx Japan index was little changed at 65 as of 9:36 a.m. in Tokyo, Citigroup prices show. The measure is poised to fall 13.4 basis points since May 30, after slipping 7.6 basis points last month, CMA data show.
The 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.