ICBC to Swire Pacific Market Dollar Debt as Asia Bond Risk Falls
Industrial & Commercial Bank of China Ltd. (601398), Swire Pacific Ltd. (19), Korea Western Power Co., and First Gen Corp. are marketing dollar notes, as Asian bond risk dropped the most in almost two weeks.
ICBC is offering a Basel III-compliant, 10-year subordinated security, according to a person familiar with the matter. Swire Pacific is also marketing a dollar note due in 10 years, another person said. The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan tumbled 5 basis points, the most since Sept. 19, to 150 basis points as of 8:17 a.m. in Hong Kong, prices from data provider CMA and Australia & New Zealand Banking Group Ltd. show.
The first U.S. government shutdown in 17 years may mean dollar-denominated corporate bonds outperform stocks this month, if the political gridlock persists, according to strategists from Bank of America Corp. to Wells Fargo & Co. Issuers are also looking to lock in rates after the Federal Reserve decided last month to defer cutting stimulus and amid speculation it may now start tapering later this quarter.
“There’s a bit of a backlog from summer,” said Herman Van Den Wall Bake, head of fixed income capital markets, Asia at Deutsche Bank AG. “There may be an element of pre-funding before the first quarter of next year, with issuers looking to lock-in debt before interest rates start to rise.”
Korea Western Power, the unit of Korea Electric Power Corp., the country’s biggest utility, is seeking to sell a U.S. dollar five-year security at an extra yield of 185 basis points more than Treasuries, a person familiar with the matter said. First Gen is marketing 10-year dollar notes to yield about 6.625 percent, another person said, asking not to be identified because the terms aren’t set.
The offerings come after issuance in euros, dollars and yen by borrowers in Asia outside Japan dropped to $23 billion last quarter, the lowest since the last three months of 2011, data compiled by Bloomberg show.
The Markit iTraxx Asia index is set for its lowest close since Sept. 26, according to data provider CMA.
The Markit iTraxx Australia index fell 4 basis points to 118 as of 10:11 a.m. in Sydney, according to Westpac Banking Corp. prices. The measure is poised for its biggest decline since Sept. 19, according to data from CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.
The Markit iTraxx Japan index retreated 3 basis points to 92 as of 9:21 a.m. in Tokyo, according to Citigroup Inc. prices. The gauge is set for its lowest level since Sept. 23, CMA data show.
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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