CNPC Plans Dollar Bonds as Borrowing Costs Drop to Six-Week LowTanya Angerer and Anurag Joshi
China National Petroleum Corp., the country’s largest oil producer and owner of the nation’s biggest energy producer, is marketing U.S. dollar-denominated notes as borrowing costs fall to an almost six-week low. Bond risk in Asia outside of Japan declined.
CNPC General Capital Ltd., a unit of CNPC, is offering three-year securities at a spread of about 135 basis points more than Treasuries, five-year notes at about 160 basis points and 10-year bonds at about 195 basis points, a person familiar with the matter said. Average yields on dollar notes dropped three basis points to 4.26 percent yesterday, the least since Feb. 27, according to JPMorgan Chase & Co. indexes.
Republic of Indonesia, Bank of Ceylon and CIFI Holdings Group Co., a Chinese developer, sold $3.8 billion of notes denominated in the U.S. currency yesterday, ending a lull in issuance which began March 28, according to data compiled by Bloomberg. Other borrowers in the region planning sales include China Oil & Gas Group Ltd., Texhong Textile Group Ltd. and South Korea’s government.
“There is a huge pipeline,” said Brayan Lai, a Singapore-based analyst in emerging-market credit trading at Jefferies Group LLC. “It’s the start of the quarter and there’s cash to be put to work” he said, adding that policy banks and state-owned companies could be among those seeking to raise funds.
Dollar notes sold by Chinese borrowers have returned 12.86 percent in the past year, according to HSBC Holdings Plc indexes. That compares with 13.13 percent for securities in India, 7.85 percent for debt in Indonesia and 9.71 percent for dollar bonds in the region as a whole, the data show.
CNPC last sold dollar bonds in April last year when it raised $1.15 billion in a two-part issue, Bloomberg data show. The Beijing-based company has about $80 billion of bonds and loans outstanding, the data show.
Its $650 million of 2.75 percent notes due 2017 and sold at 99.991 cents on the dollar were trading at 103.1 cents on the dollar as of 3:33 p.m. in Singapore, Royal Bank of Scotland Group Plc prices on Bloomberg show. The notes’ yield rose to 1.945 percent, the highest since Dec. 18.
CNPC’s new dollar notes have been assigned an A+ rating by Standard & Poor’s and an A1 rating by Moody’s Investors Service, the ratings companies said in e-mailed reports today.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan dropped 2 basis points to 117.5 basis points as of 2:56 p.m. in Hong Kong, Australia & New Zealand Banking Group Ltd. prices show. The gauge is set for its lowest close since March 25, according to data provider CMA.
The Markit iTraxx Japan index rose 1 basis point to 93 as of 3:48 p.m. in Tokyo, according to Deutsche Bank AG prices. The benchmark is poised for its first increase after four consecutive days of declines, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.
The Markit iTraxx Australia index slid 2 basis points to 115 basis points as of 10:55 a.m. in Sydney, according to National Australia Bank Ltd. prices. The measure is on track for its lowest close since the current series of the index started trading on March 20, 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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