Chinese Bad-Loan Banker Markets Bonds as Costs Slide to May LowRachel Evans
China Orient Asset Management Corp., which purchases, manages and disposes of non-performing loans, is offering a sale of dollar-denominated debt as premiums for the nation’s issuers fall to a three-month low.
The state-owned company plans to sell five-year bonds at about 337.5 basis points more than similar-maturity Treasuries, a person familiar with the matter said, asking not to be identified because the terms aren’t set. The average spread on dollar securities sold by Chinese borrowers narrowed to 367 basis points yesterday, the tightest since May 31, according to JPMorgan Chase & Co. indexes. Sri Lanka’s National Savings Bank, Export-Import Bank of Korea and Sumitomo Life Insurance Co. are also marketing debt.
Industrial output in the world’s second-largest economy expanded at the fastest pace in 17 months in August. Economists at Bank of America Corp. today became the latest to boost their forecast for China’s economic growth, projecting a 7.7 percent expansion this year from a previous outlook for 7.6 percent.
“The recent data has definitely been a little bit more supportive,” said Kaushik Rudra, the global head of credit research in Singapore at Standard Chartered Plc. “A lot of people were concerned about what sort of growth outlook they were going to get in China and were starting to price in a very negative scenario. That is getting priced down and that could provide stability to the markets over the short term.”
Factory production rose 10.4 percent in August from a year earlier, the National Bureau of Statistics said in a statement in Beijing on Sept. 10, beating the median 9.9 percent forecast of 45 analysts surveyed by Bloomberg News.
China Orient Asset Management, which also engages in investment banking, financing services and private equity, plans to sell the notes through unit Century Master Investment Co., the person with knowledge of the matter said.
Cifi Holdings Group Co., a Chinese builder, sold the first U.S.-dollar Asian junk debt in almost two months yesterday, offering $225 million more of its existing 12.25 percent bonds due 2018, data compiled by Bloomberg show. Dalvey Asset Holding Ltd. bought $100 million of the notes in a private placement arranged by UBS AG, according to a statement to the Hong Kong stock exchange.
National Savings Bank, a high-yield Sri Lankan lender rated B+ by Standard & Poor’s, is planning to sell five-year notes at about 9.25 percent, a person familiar with the matter said.
Export-Import Bank of Korea is marketing three-year floating-rate notes at about 95 basis points more than the three-month London interbank offered rate, and five-year bonds at about 145 basis points more than Treasuries, a person with knowledge of the details said.
Sumitomo Life Insurance Co. is meanwhile considering pricing 60-year dollar bonds, which can be bought back by the company after 10 years, at about 6.5 percent, according to a person familiar with the matter.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan declined 4 basis points to 135 as of 8:35 a.m. in Hong Kong, Australia & New Zealand Banking Group Ltd. prices show. The gauge is set for its lowest close since Sept. 10, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.
The Markit iTraxx Japan index fell 1.5 basis points to 84.5 basis points as of 9:38 a.m. in Tokyo, Citigroup Inc. prices show. The index is on track for its lowest close since May 23, according to CMA.
The Markit iTraxx Australia index slid 1.5 basis points to 109.5 basis points as of 11:11 a.m. in Sydney, according to Deutsche Bank AG. The index is on course for its lowest close since May 29, according to data provider 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.