Banco Santander Chile Considers Country’s First Dim Sum Bond
Banco Santander Chile, the country’s second-biggest lender by assets, is considering becoming the first Chilean bank to raise money in the Chinese bond market, Treasurer Emiliano Muratore said in an interview.
Santander Chile, which funds itself independently of its Madrid-based parent, met investors in Hong Kong and Singapore last week and is waiting for some of them to confirm they have approval to buy its debt before deciding whether to sell, Muratore said by telephone from Santiago. The bank would probably issue bonds denominated in yuan, known as the Dim Sum market, he said.
Global issuers accounted for a record share of yuan- denominated bond sales in Hong Kong last quarter as raising Chinese currency and swapping the proceeds into dollars became more attractive. A shortage of renminbi and a surge of dollars have driven swap rates paid to obtain the local currency to record highs.
“That market has been pretty active lately with non-Asian issuers,” Muratore said. “We will probably do something in the next few weeks.”
Deutsche Bank AG, Goldman Sachs Group Inc. and Standard Chartered Plc arranged the investor meetings.
Banco de Chile sold last month 400 million Hong Kong dollars ($52 million) of bonds in a deal managed by Bank of America Corp. That sale, as well as sales of bonds in dollars by Chilean banks including Santander, has helped push down peso cross-currency swaps, making it less attractive for companies to borrow in dollars and swap back into pesos, according to calculations by Bloomberg.
The extra yield, or spread, investors demand to buy Santander Chile’s dollar bonds due in 2022 instead of U.S. government debt has fallen to 166 basis points from 233 basis points when they were first sold last month.
Santander’s senior dollar bonds due in 2015 are the best- performing among 50 Chilean dollar bonds tracked by Bloomberg in the past month. The spread on the debt has fallen to 157 basis points from a high of 363 basis points in June.
Five-year credit-default swaps tied to Banco Santander SA (SAN)’s debt fell to a seven-month low of 271 basis points yesterday after Spain kept its Moody’s Investors Service investment-grade rating. A basis point equals $1,000 annually on a contract protecting $10 million.
Dim Sum Yield
The average yield on Dim Sum bonds, yuan-denominated bonds sold outside China, fell seven basis points in the past two weeks to 4.03 percent today, according to a Deutsche Bank AG index. The yield on the debt has increased from 3.76 percent on Aug. 10, the lowest since Deutsche Bank began tracking the data in January 2011.
Appetite for the debt stems from investors’ betting on appreciation in the yuan, Standard Chartered wrote in a research note last week. It rated the debt “underweight,” saying investors were reluctant to invest in China.
The yuan appreciated today to a 19-year high against the U.S. dollar after Premier Wen Jiabao said the economy has started to stabilize. Growth in industrial output, retail sales and fixed-asset investment accelerated in September and gross domestic product matched forecasts.
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