IL&FS Transportation Networks Ltd., a Mumbai-based designer of toll roads, plans to sell Dim Sum bonds in what would be the first offshore yuan-denominated note from an Indian company in more than a year as yields fall.
ITNL International Pte, a unit of IL&FS Transportation Networks, hired Barclays Plc and CLSA Ltd. to arrange fixed-income meetings from tomorrow, a person familiar with the matter said. Yuan borrowing costs for Indian issuers have dropped 38 basis points this year to 3.8 percent, the most outside of South Korea among countries tracked by Bank of America Merrill Lynch indexes.
China, the world’s second-largest economy, is promoting the use of its currency in global trade and finance. The yuan ranked seventh for global payments in April, according to Society for Worldwide Interbank Financial Telecommunications. China Construction Bank Co., the nation’s second largest lender, won its first yuan-clearing mandate in London last month.
“To non-Chinese issuers, the Dim Sum bond market may represent a new investor base,” Ken Hu, Hong Kong-based chief investment officer of fixed income for Asia Pacific at Invesco Asset Management. “Dim Sum bonds have low correlations with most other global fixed income markets, providing diversification benefits to investors.”
The last Indian company to sell Dim Sum bonds was ICICI Bank Ltd., which issued 650 million yuan ($105 million) of 4 percent notes at par on June 18 last year, according to data compiled by Bloomberg. Those notes yielded 3.885 percent July 4. Offshore yuan bond offerings soared to a record last half, touching 117 billion yuan, as issuers from countries including Mongolia tapped the market for the first time.
Trade & Development Bank of Mongolia sold 700 million yuan of three-year 10 percent securities in January.
IL&FS Transportation Networks has tapped the Dim Sum market once before, issuing 630 million yuan of 5.75 percent securities in April 2012. The notes are currently trading at a 3.697 percent yield, Bloomberg-compiled prices show.
Dim Sum bond yields average 4.143 percent versus 4.647 percent for Indian dollar-denominated notes, HSBC Holdings Plc and JPMorgan Chase & Co. indexes show.
Chinese miner Jinchuan Group Co. is also considering offshore yuan notes, hiring Bank of China Ltd., HSBC, Morgan Stanley and Wing Lung Bank Ltd. to arrange meetings with bond investors in Hong Kong and Singapore from tomorrow, another person familiar with that matter said today.
In the U.S. dollar market, Korea’s Kookmin Bank is marketing three-year debentures at about 85 basis points more than similar-maturity Treasuries and expects to price the notes later today.
ONGC Videsh Ltd., a unit of India’s Oil & Natural Gas Corporation Ltd., is offering five- and 10-year dollar bonds at spreads of about 180 basis points and 225 basis points respectively.
The cost of insuring corporate and sovereign bonds in the Asia-Pacific region outside of Japan was little changed today.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was steady at 99 basis points as of 8:34 a.m. in Singapore, Australia & New Zealand Banking Group Ltd. prices show. The gauge is poised to fall 30.2 basis points this year after a 4.3 basis-point drop last week, according to data provider CMA.
The Markit iTraxx Australia index was also little changed at 82 basis points as of 10:39 a.m. in Sydney, ANZ prices show. The benchmark fell 2.8 basis points in the five days to July 4 and is set to decrease 16.2 basis points in 2014, CMA data show.
In Japan, the Markit iTraxx Japan index declined 0.25 of a basis point to 63 as of 9:35 a.m. in Tokyo, on course for its lowest close in six years, according to Citigroup Inc. prices and CMA.
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.