Dollar Bond Sales in Asia Rise to 37-Week High as Cnooc Markets
Sales of U.S. dollar-denominated bonds in the Asia-Pacific region including Japan rose to a 37-week high as China National Offshore Oil Corp. (883) and China General Nuclear Power Holding Corp. market notes.
Regional issuance this week of $7.4 billion is the highest since $8.9 billion in the seven-day period ended Jan. 11, according to data compiled by Bloomberg. Cnooc, China’s largest offshore oil and gas producer, is offering a 10-year security to yield 210 basis points more than Treasuries, according to people familiar with the matter. China General Nuclear is planning a five-year debenture at a spread of about 240 basis points, another person said.
The Federal Reserve’s decision to defer paring stimulus has sparked a 31 basis point drop since Aug. 30 in corporate dollar borrowing costs in Asia to 4.61 percent, set for the biggest monthly drop since July 2012, according to HSBC Holdings Plc indexes. Yields had surged to an almost two-year high of 5.09 percent on Sept. 6. BHP Billiton Ltd. (BHP), the world’s biggest mining company, sold its first dollar bonds in 19 months yesterday, the data show.
“We expect USD bond issuance to remain robust as companies seek low cost funding to take advantage of the recent pull back in treasury yields,” said Michele Barlow, Hong Kong-based head of Asia-Pacific credit and convertible bonds research at Bank of America Corp. “We would expect to see supply from a wide range of issuers as long as the markets remain receptive.”
The benchmark U.S. 10-year yield dropped three basis points, or 0.03 percentage point, to 2.63 percent at 5 p.m. yesterday in New York, according to Bloomberg Bond Trader prices. It touched 2.61 percent, the lowest since Aug. 12.
Vista Land & Lifescapes Inc., a Philippines developer owned by the family of ex-senator Manuel ‘Manny’ Villar, is in the market with a five-year security at a yield of about 7 percent, another person said.
BHP’s finance unit issued $500 million each of three-year, floating-rate notes to yield 25 basis points more than the three-month London interbank offered rate and 2.05 percent, five-year debentures to yield 70 basis points more than similar-maturity Treasuries, according to data compiled by Bloomberg. It also sold $1.5 billion of 10-year debt at a spread of 125 basis points and $2.5 billion of 30-year securities at a 130 basis-point spread.
Korea Hydro & Nuclear Power Co. issued $500 million of 2.875 percent notes yesterday, the data show. Investors bought $750 million of 7.25 percent debt yesterday from Country Garden Holdings Co.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was little changed at 149 basis points as of 8:09 a.m. in Hong Kong, Australia & New Zealand Banking Group Ltd. prices show. Series 20 of the index began trading on Sept. 23 with Export-Import Bank of India and Shinhan Bank the newest members.
Fresh versions of the benchmarks are created every six months when companies are added or dropped depending on their ratings, cost of protection and ease of trading. The indexes typically have a maturity of five years.
The Markit iTraxx Japan index advanced 0.5 of a basis point to 93 basis points as of 9:17 a.m. in Tokyo, according to Citigroup Inc. prices. The measure is poised to rise 4 basis points this week, according to data provider CMA.
The Markit iTraxx Australia index was also little changed at 119 basis points as of 10:55 a.m. in Sydney, according to Westpac Banking Corp. prices. The gauge is set for its lowest close since Sept. 20, when the new series 20 of the index began trading, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.
Credit-default swap 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.
The swap contracts pay the buyer face value in exchange for the underlying securities if a borrower fails to meet its debt agreements.
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