Dollar Bond Sales in Asia Pause After Surge in Treasury YieldsTanya Angerer
Asia’s borrowers refrained from marketing any dollar-denominated bonds amid a surge in Treasury yields after better-than-expected U.S. jobs data.
Benchmark 10-year Treasury rates jumped 15 basis points on Nov. 8, the most since July 5. Dalian Wanda Commercial Properties Co., China’s biggest commercial land developer, postponed an offering while PT Metropolis Propertindo Utama, an Indonesian holding company whose units construct commercial and residential buildings, also put off a planned sale, people familiar with those matters said last week, asking not to be identified because the details are private.
U.S. employers added 204,000 workers last month, the Labor Department said Nov. 8, following a revised 163,000 gain in September that was larger than initially estimated. The median forecast of 91 economists surveyed by Bloomberg called for a 120,000 increase. Yields have risen since the Federal Reserve said Oct. 30 the economy showed signs of “underlying strength.”
“With U.S. Treasury yields shooting up and being more volatile, I wouldn’t expect much activity on the primary side today,” said Luc Froehlich, a Hong Kong-based fixed-income portfolio manager at Manulife Asset Management, which oversees $258 billion in assets globally. “Some issuers must be kicking themselves after not being willing to pay up on the new issue premium and get their deal done while rates were so low.”
The Fed is expected to cut its bond-buying program in March, according to the median estimate of 32 economists in a Bloomberg News Survey conducted last week.
Dollar borrowing costs for companies in Asia averaged 5.50 percent on Nov. 8, near a more than four-month low of 5.43 percent reached Oct. 31, JPMorgan Chase & Co. indexes show.
The cost of insuring corporate notes against non-payment in Japan and Australia declined today, according to traders of credit-default swaps.
The Markit iTraxx Japan index fell 1.5 basis points to 92.25 basis points as of 9:17 a.m. in Tokyo, Citigroup Inc. prices show. The measure is poised for its lowest close since Oct. 31, according to data provider CMA.
The Markit iTraxx Australia index decreased 1 basis point to 104.5 as of 11:16 a.m. in Sydney, according to National Australia Bank Ltd. The benchmark rose 0.6 of a basis point last week, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the private market.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was little changed at 138 basis points as of 8:40 a.m. in Singapore, Standard Chartered Plc prices show. The gauge has declined for the past four business days, according to 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.