Asian Corporate Dollar Bond Sales Surge to Record in January

Dollar-denominated bond sales from Asia surged to a record in January as companies sought to plug a gap in loan funding.

Issuance from the region, excluding Japan, rose to $23.4 billion, 39 percent more than the previous all-time monthly high of $16.8 billion in September, according to data compiled by Bloomberg. The monthly average for such offerings has been $3.5 billion since the data began in 1999. Hainan Airlines Co. received more than $2.1 billion in orders for its $500 million seven-year note sold yesterday, according to a person familiar with the deal. Borrowers refrained from marketing notes in the U.S. currency today.

Investor demand for Asian corporate debt drove yield premiums on the securities to a 20-month low of 245 basis points more than Treasuries on Jan. 7, according to JPMorgan Chase & Co. indexes. Global regulators led by the Basel Committee on Banking Supervision are seeking to increase banks’ protection against losses, curbing their appetite for lending. Syndicated loans in the region totaled $8.1 billion last month, a 26 percent drop compared with January 2012, the data show.

“A lot of corporates, especially the investment grade names, are taking the opportunity to expand their funding base and not rely entirely on loans,” Ankur Prakash, director in debt capital markets for Northeast Asia at Standard Chartered Plc, said at a roundtable discussion in Hong Kong on Jan. 30. With stricter regulations known as Basel III coming and European banks deleveraging, Asian companies are experiencing a shortfall in loan financing, Prakash said.

Bond Risk

Thai Oil Pcl, Korea Development Bank and a unit of Melco Crown Entertainment Ltd. led U.S. currency bond sales from Asia last month, raising $1 billion each, according to data compiled by Bloomberg.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan dropped two basis points to 115 basis points as of 9:40 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The gauge climbed 2.8 basis points in January, rising for a second consecutive month, according to data provider CMA.

The Markit iTraxx Australia index dropped three basis points to 119 as of 11:08 a.m. in Sydney, according to Westpac Banking Corp. prices. The benchmark is poised for its lowest close in three days, after declining for a fifth straight month in January, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Japan index fell one basis point to 134 as of 10:09 a.m. in Tokyo, according to Deutsche Bank AG prices. The measure is headed for its lowest level since August 2011, CMA prices 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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