Asian Dollar Bonds Head for Weekly Drop Ahead of U.S. Jobs DataDavid Yong
Asian dollar bonds are set for a second weekly decline ahead of U.S. employment data released today as investors speculate the Federal Reserve may taper stimulus as early as this quarter.
The region’s dollar-denominated debt fell 0.3 percent this week through yesterday, following a 0.2 percent loss in the previous period, according to indexes compiled by JPMorgan Chase & Co. Sales of the notes by Asian companies jumped 68 percent after Baidu Inc., Nan Ya Plastics Corp. and Poly Real Estate Group Co. raised $1.68 billion this week, according to data compiled by Bloomberg.
The JPMorgan index of Asian dollar debt plunged to the lowest in more than nine months on June 24, after Fed Chairman Ben S. Bernanke said the U.S. central bank may curb its bond buying this year and end it in mid-2014 if economic growth is in line with its projections. American employers probably added 185,000 jobs last month, compared with 195,000 in June, a Bloomberg News survey shows.
“There are still worries about the outlook for global employment, including in Europe,” said Ray Choy, head of regional fixed-income research at RHB Research Institute Sdn. in Kuala Lumpur. “We see a steady job number in the U.S., not an acceleration. Bond yields are still going to rise over the medium term.”
Baidu’s offering led deals from the region outside Japan to $4.1 billion last month, up from $500 million in June that was the slowest period since December 2008, according to data compiled by Bloomberg. The operator of China’s most popular search engine sold $1 billion of five-year notes on July 30 in the biggest offering from the nation since May 15.
The cost of insuring Asia-Pacific corporate and sovereign bonds from default decreased, according to traders of credit-default swaps.
The Markit iTraxx Japan index slid 2.5 basis points to 96 basis points as of 9:39 a.m. in Tokyo, Citigroup Inc. prices show. The measure is on track for its lowest close since July 24, according to data provider CMA.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan lost 1 basis point to 142 basis points as of 8:44 a.m. in Hong Kong, Westpac Banking Corp. prices show. The gauge fell 5.9 basis points last month in its first decline since April, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.
The Markit iTraxx Australia index declined 1 basis point to 119 basis points as of 10:35 a.m. in Sydney, according to National Australia Bank Ltd. The index fell 13.8 basis points last month, according to CMA.
Credit-default swap indexes are benchmarks for protecting 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.