Asia Bond Risk Holds at Two-Week Low as Holidays Slow Debt Sales

Asian bond risk held at a two-week low. Companies held back from marketing dollar-denominated notes as Lunar New Year holidays continue across the region.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was unchanged at 111 basis points as of 8:10 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. The gauge closed at its lowest level yesterday since Jan. 29 according to data provider CMA. Markets in China, Taiwan, and Vietnam remain shut, with Hong Kong returning to work today.

Holidays have curtailed U.S. currency debt sales from Asia outside of Japan this month after companies raised a record $23.4 billion in January, data compiled by Bloomberg show. Indian lenders may seek to offer notes next month, according to Barclays Plc. Yield premiums on dollar debt from the world’s second-most populous nation shrank to 304 basis points more than Treasuries yesterday, within 10 basis points of the least since May 2011, a JPMorgan Chase & Co. index shows.

“Many participants are still out due to the Chinese New Year holidays so the market is just getting ready for next week,” said Krishna Hegde, the Singapore-based head of Asia credit research at Barclays. “Among segments that have been absent so far this year, we would expect the Indian banks to issue bonds in March after the budget at month-end.”

Indian Finance Minister Palaniappan Chidambaram is scheduled to unveil the budget on Feb. 28.

Flextronics International Ltd., a Singapore-based and U.S.- listed electronics manufacturer, raised $1 billion from a two-part bond sale on Feb. 12, data compiled by Bloomberg show.

Credit-Default Swaps

The Markit iTraxx Australia index was at 113 basis points as of 11:09 a.m. in Sydney, according to National Australia Bank Ltd. prices. The benchmark closed at 113 yesterday, the lowest since Jan. 10, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.

The Markit iTraxx Japan index was unchanged at 122 basis points as of 9:23 a.m. in Tokyo, according to Citigroup Inc. prices.

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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