Asia Banks and Developers Market Dollar Notes as Spreads Tighten
Sunac China Holdings Ltd. (1918), United Overseas Bank Ltd. (UOB) and Syndicate Bank (SNDB) are marketing benchmark dollar-denominated bonds as yield premiums in Asia tumble to a 16-month low. Debt risk in the region was little changed.
Sunac, a real-estate developer part-owned by Bain Capital LLC, is offering five-year notes at a yield of about 12.75 percent, people familiar with the matter said, the second speculative-grade sale in as many days. UOB is marketing Lower Tier 2 securities at a spread of about 245 basis points, and Syndicate Bank a 5 1/2-year note at a premium of about 380 basis points, separate people said today.
Spreads on Asian dollar debt narrowed to 271 basis points, or 2.71 percentage point, more than Treasuries yesterday, the least since May 2011, HSBC Holdings Plc indexes show. Yield premiums have tightened 8 basis points since Sept. 28 after the U.S. Federal Reserve and the European Central Bank last month decided to buy securities and support the economy, triggering a surge in issuance. The International Monetary Fund lowered its global growth forecasts today.
“Asia ex-Japan credit has a large pipeline on the back of the Fed and ECB largesse despite the IMF downgrades,” said Owen Gallimore, the head of Asia credit strategy at Australia & New Zealand Banking Group Ltd. in Singapore. “Fund inflows and the relatively light year-to-date issuance in high-yield means there is demand for primary paper.”
The Fed said it would buy $40 billion of mortgage debt a month to help reduce unemployment and lower costs for homeowners while the ECB unveiled a bond-purchase program to support indebted nations. Dollar issuance in Asia surged to a record $16.8 billion in September.
The IMF lowered its forecasts for the world economy to 3.3 percent this year, the slowest pace since the 2009 recession, and warned of even slower expansion unless officials in the U.S. and Europe address threats to their economies.
Credit-default swap indexes in the region excluding Japan were little changed. The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan held at 129.5 as of 8:36 a.m. in Hong Kong, and the Markit iTraxx Australia index was at 154 basis points as of 11:36 a.m. in Sydney, according to prices from Credit Agricole SA.
The Markit iTraxx Japan index rose 1.5 to 224 as of 9.32 a.m. in Tokyo, Citigroup Inc. prices show.
The swap contracts pay the buyer face value in exchange for the underlying securities if a borrower fails to meet its debt agreements. A drop signals improving perceptions of creditworthiness, while an increase suggests the opposite.
Borrowers are returning to the debt capital markets after public holidays yesterday in the U.S. and Japan, two of the world’s three biggest economies, and in China last week.
China South City Holdings Ltd. (1668), rated B1 by Moody’s Investors Service, started marketing high-yield notes yesterday, ending a two-week lull in issuance of junk debt, which is rated Ba1 or lower by Moody’s or BB+ or lower by Standard & Poor’s.
Department store operator Lifestyle International Holdings Ltd. (1212) is also offering $300 million of 10-year securities, another person said today, asking not to be identified because the terms aren’t set.
PT Perusahaan Listrik Negara, Indonesia’s state-owned electric utility, and hotel operator Regal Hotels International Holdings Ltd. (78) are both considering bond sales after investor meetings, according to other people familiar with the matter.