Asian Dollar Bond Sales Reach Quarterly Record on Yield Allure

Borrowers in Asia outside Japan sold $4.9 billion of dollar-denominated bonds this week, pushing issuance this quarter to a record, as yields on the region’s debt attract global investors.

1Malaysia Development Bhd., IDBI Bank Ltd. and PT Bank Rakyat Indonesia Persero Tbk led offerings, sending sales since Dec. 31 to $39.7 billion, more than any previous quarter, according to data compiled by Bloomberg. Yields on debt sold by Asian issuers fell 2 basis points this week to 4.34 percent yesterday, according to JPMorgan Chase & Co. indexes. That compares with the average 2.61 percent on corporate bonds globally, Bank of America Merrill Lynch indexes show.

Borrowers in Asia more than doubled offerings from last week even as an agreement forcing Cypriot depositors to share in the cost of the latest euro-zone bailout, which was later rejected by lawmakers, sparked concerns over possible bank runs. Cypriot politicians will begin debate today on legislation to unlock bailout funds and prevent a financial collapse with a European Central Bank deadline to cut off funding for its lenders in three days.

“Compared to Europe, Asia is still a good market at the moment,” said Louisa Lam, a Hong Kong-based credit analyst at HSBC Holdings Plc. Investors are “quite interested” in the yields offered on primary issuance in the region, she said.

1Malaysia Development

1Malaysia Development, the state investment company, sold $3 billion of dollar bonds on March 19, according to a person familiar with the matter. This is the second such offering by the sovereign-wealth fund, which sold $1.75 billion of 10-year debt to yield 5.99 percent in May 2012, data compiled by Bloomberg show.

IDBI Bank priced $500 million of debt due January 2019 and Bank Rakyat raised the same amount from an offering of five-year bonds, data compiled by Bloomberg show.

The cost of insuring corporate and sovereign bonds in the Asia-Pacific region against non-payment climbed today, according to traders of credit-default swaps. New series of the gauges began trading this week.

The Series 19 Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan rose 2 basis points to 120 basis points as of 8:03 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show. Series 18 of the index also advanced 2 basis points to 104, RBS prices show.

The Series 19 Markit iTraxx Australia index added 2 basis points to 120.5 as of 11:11 a.m. in Sydney, according to Westpac Banking Corp. prices. Series 18 of the Markit iTraxx Australia index is at 106 basis points, Westpac prices show.

Series Roll

The Series 19 Markit iTraxx Japan index rose 2 basis points to 103 as of 9:02 a.m. in Tokyo, according to Citigroup Inc. prices. The earlier Series 18 index climbed 3 to 108, Citigroup prices show.

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 maturity date of the new indexes is June 2018, compared with December 2017 on the Series 18 versions.

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.