ICICI and Westpac Market Dollar Notes as Asia Bond Risk Declines

ICICI Bank Ltd. and Westpac Banking Corp. are marketing U.S. dollar bonds, amid falling credit risk in the Asia-Pacific region.

ICICI is marketing a 5.5-year note at about 375 basis points more than Treasuries, according to a person familiar with the matter, who asked not to be identified because the matter is private. Westpac is offering three-year unsecured debt and a five-year covered bond, according to an e-mailed statement today from joint sale manager RBC Capital Markets LLC.

The cost of insuring Asia-Pacific corporate and sovereign bonds from default declined, according to traders of credit-default swaps. Issuance by the region’s banks declined 28 percent to $56.1 billion this year. The extra yield investors demand to own the debt sold by lenders in Asia outside of Japan has risen to 256 basis points more than Treasuries from 239 on March 12, which was the lowest since 2011, JPMorgan Chase & Co.’s indexes show.

“Their wholesale cost of funding is about the same as for non-financial corporates so non-financial corporates therefore have an incentive to bypass the banking system and go straight to the capital markets,” said Viktor Hjort, a Hong Kong-based managing director in Morgan Stanley’s research team. “We’ll need to see tighter credit spreads for banks before they’re going to become bigger issuers.”

Bond Risk

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 1 basis point to 132 basis points as of 8:23 a.m. in Hong Kong, Australia & New Zealand Banking Group Ltd. prices show. The gauge is set for its lowest close since Oct. 31, 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 slid 1.5 basis points to 102 basis points as of 11:31 a.m. in Sydney, according to Westpac Banking Corp. The benchmark is on course for its lowest close since May 22, according to data provider CMA.

The Markit iTraxx Japan index also decreased 1 basis point to 84 as of 9:37 a.m. in Tokyo, Deutsche Bank AG prices show. The index is on track for its lowest close since Sept. 19, 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.

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