Asian Dollar Debt Returns Least in 18 Months Amid Record Sales

Dollar-denominated bonds from Asian companies are returning the least in 18 months this quarter after borrowers from the region sold the most-ever debt.

Notes in the U.S. currency gained 1.1 percent this year as of March 27, the least since the three months ending Sept. 30, 2011, according to Bank of America Merrill Lynch indexes. 1Malaysia Development Bhd., Taiwan Semiconductor Manufacturing Co. and Bharti Airtel Ltd. led $45.3 billion of bond sales from Asia outside Japan since Dec. 31, the busiest quarter on record, according to data compiled by Bloomberg.

The cost of insuring corporate and sovereign bonds in Asia against non-payment is on track to increase for the first time in three quarters, according to traders of credit-default swaps and data provider CMA. A similar gauge of Australian bond risk is set to snap six months of declines with an 8.8-basis-point jump, the data show.

Securities sold by PT Pertamina Persero were the worst performers among the top 50 issuers in Merrill Lynch’s Asian Dollar Corporate index, losing 5.2 percent. The Indonesian company hired Barclays Plc, Citigroup Inc. and Royal Bank of Scotland Group Plc to arrange a sale of dollar-denominated bonds, a person familiar with the matter said March 1.

Noble Group Ltd.’s bonds gained the most, returning 6.5 percent, the indexes show. Five-year notes sold by the issuer on March 13, which are not included in the index, rose to 100.49 cents on the dollar yesterday from an issue price of 99.268 cents, prices from Bloomberg show.

Bond Risk

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan climbed 2 basis points to 121.5 as of 8:49 a.m. in Hong Kong, Royal Bank of Scotland prices show. The benchmark is headed for an 8.2-basis-point increase this quarter, according to data provider CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.

The Markit iTraxx Australia index rose 5 basis points to 123 basis points as of 11:08 a.m. in Sydney, National Australia Bank Ltd. prices show.

The Markit iTraxx Japan index increased 2 to 111 as of 9:23 a.m. in Tokyo, according to Citigroup prices. The gauge has fallen 13.7 basis points so far in March, set to decline for the sixth straight month, according to CMA.

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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