Asia Dollar Bond Sales Surge to Record as Sinopec Plans IssueTanya Angerer
China Petroleum and Chemical Corp. and Beijing Enterprises Water Group Ltd. are planning to sell U.S. dollar-denominated bonds as weekly sales in Asia outside of Japan surged more than 50 times to a record.
Sinopec, as the petroleum refiner and crude oil producer is known, will meet fixed-income investors in Asia, Europe and the U.S. from April 15, according to a person familiar with the matter. Beijing Enterprises Water, a Hong Kong-listed water treatment system developer, hired five banks to arrange its issue, according to a statement to the city’s exchange. Offerings in the region touched $7.6 billion this week as eight borrowers sold debt, compared with $150 million from one company in the previous five business days, according to data compiled by Bloomberg.
The Republic of Indonesia, which issued $3 billion of notes April 8, is this year’s biggest borrower, followed by China National Petroleum Corp. which sold $2 billion of debt April 9, Bloomberg data show. State Bank of India, the nation’s largest lender by assets, sold $1 billion of securities yesterday. The cost of borrowing in the U.S. currency for issuers in the region fell to a five-week low of 4.26 percent on April 8, and was at 4.27 percent April 11, according to JPMorgan Chase & Co. indexes.
“With bond yields so low, issuers are attracted to come now,” said Shankar Narayanaswamy, the Singapore-based global head of credit strategy at Standard Chartered Plc. “It’s pure coincidence they all came in the same week.”
Yingde Gases Investment Ltd. is also marketing five-year dollar notes at about 8.5 percent, a person familiar with the matter said today, declining to be identified because the terms aren’t set. Yingde Gases hasn’t sold bonds before, Bloomberg data show.
Sinopec will use the proceeds of its sale to fund the acquisition of some overseas assets, invest in offshore businesses and repay bank debt, according to a Hong Kong stock exchange statement.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was little changed at 113 basis points as of 2:46 p.m. in Hong Kong, Westpac Banking Corp. prices show. The gauge is set for its lowest close since before the current series started trading on March 20, according to CMA.
Investors should buy protection at 112 basis points as a glut of high-yield bond sales and a slowing Chinese economy may cause credit spreads to widen further in the second quarter, Societe Generale SA wrote in a report today. Yield premiums rose 21 basis points in the three months to March 31, according to JPMorgan indexes.
The Markit iTraxx Japan index fell 3 basis points to 87 as of 9:15 a.m. in Tokyo, according to Citigroup Inc. prices. That level would be its lowest close since April 2010, 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 decreased 0.75 of a basis point to 111 as of 10:14 a.m. in Sydney, according to Westpac Banking Corp. prices. The benchmark was last lower on March 19, the day before the current series began, CMA data 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.