Investors Returning to Asia Dollar Debt, Standard Chartered SaysYusuke Miyazawa
Wider spreads are drawing investors back to Asia’s dollar-denominated bond market after yield premiums rose to an eight-month high, according to Standard Chartered Plc.
“If you look at the mood of the market, it seems to have settled down somewhat,” Kaushik Rudra, the Singapore-based global head of credit research at Standard Chartered, said today. “Now investors are seeing more interesting opportunities because of slightly wider spread levels.”
Investors demanded 322 basis points more than Treasuries to hold U.S. currency bonds from Asian issuers yesterday after premiums rose as high as 333 on June 13, a level unseen since Oct. 8, Bank of America Merrill Lynch data show. Offerings of dollar-denominated notes from the region stand at $669 million this month versus $17.7 billion in May, with asset managers waiting for the conclusion of a Federal Reserve meeting in the U.S. today.
“People are obviously looking for a hint from the language that comes out from the Fed, and using that to position their portfolios accordingly,” Rudra said by phone.
The Fed will release a statement and economic forecasts when its meeting ends today. Treasury yields have climbed since Chairman Ben S. Bernanke said in May the central bank could reduce its $85 billion in monthly bond purchases if there’s a sustainable improvement in employment.
KCC Corp., a South Korean manufacturer of paint products, was the last company from Asia outside of Japan to sell dollar bonds, raising $269 million yesterday, according to data compiled by Bloomberg. The offering ended an issuance drought since China Huaneng Group Corp.’s $400 million on June 4.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan gained 1 basis point to 136 basis points as of 8:27 a.m. in Hong Kong, Australia & New Zealand Banking Group Ltd. prices show. The benchmark is headed for its highest close since June 13, according to data provider CMA.
The Markit iTraxx Australia index rose 2 basis points to 126 as of 10:17 a.m. in Sydney, according to National Australia Bank Ltd. prices. The measure, which has ranged from 96.1 basis points to 134 basis points this year, is set for its second straight rise, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.
The Markit iTraxx Japan index increased 1.5 basis points to 109.5 as of 9:15 a.m. in Tokyo, according to Citigroup Inc. prices. The gauge is up 4.1 basis points this week through yesterday, CMA prices 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.