Bank of Tokyo-Mitsubishi Joins ICBC in Bond Plans as Risk Drops

Bank of Tokyo-Mitsubishi UFJ Ltd. joined Industrial & Commercial Bank of China (Asia) Ltd. in planning dollar-denominated bond offerings as credit risk in the region declines amid signs of global manufacturing rebound.

The unit of Japan’s biggest banking group is selling five-and 10-year fixed-rate notes, and debt that may be either fixed or floating which matures in three years as early as today, according to a person familiar, who asked not to be identified because the terms aren’t set. ICBC will begin investor meetings tomorrow for a possible offering, a separate person said.

Japan’s corporate bond risk is headed for its lowest level since May 28, while the Asian gauge for contracts excluding the country is set to fall to a two-week low, according to traders of credit-default swaps. Japan’s capital spending excluding software rose for the first time in three quarters in the period to June 30, government data showed yesterday. U.S. factory output data today may show a third continuous month of expansion in August, following increases in manufacturing gauges in the U.K. and China, according to a Bloomberg survey.

“Whenever we see there’s relative stability in the marketplace, and the Treasury market provides a stable backdrop, there will be issuers looking to test the market,” said Kaushik Rudra, the global head of credit research in Singapore at Standard Chartered Plc. “Most of them will be opportunistic.”

ZhengTong Auto

ICBC is meeting fixed-income investors in Singapore, Hong Kong and London from tomorrow, the person said on Sept. 2.

China ZhengTong Auto Services Holdings Ltd. hired banks for a possible bond sale, a separate person familiar with the matter said today. The Hong Kong-based luxury auto retailer will meet investors in Hong Kong, Singapore and London from tomorrow, and a Reg S dollar credit enhanced senior note issue may follow, subject to market conditions.

Bank of Tokyo-Mitsubishi UFJ is marketing its three-year fixed-rate notes at a spread of about 90 basis points, its five-year debentures at a spread of about 115 basis points and its 10-year bonds at a spread of about 145 basis points.

The Markit iTraxx Japan index fell 1.5 basis points to 90.8 as of 9:07 a.m. in Tokyo, according to Citigroup Inc. prices. The measure is down from 148.1 at the beginning of the year, according to data provider CMA.

Credit Risk

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell one basis point to 158.5 basis points as of 8:26 a.m. in Singapore, Westpac Banking Corp. prices show. That would be the lowest since Aug. 20, according to CMA. The gauge rose 16.9 last month, the most since June.

The Markit iTraxx Australia index dropped one basis point to 122 as of 10:07 a.m. in Sydney, according to Deutsche Bank AG prices. The benchmark, which rose 1.2 basis points last month, is poised for its lowest close since Aug. 26, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.

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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