Asia’s Dollar Bond Sellers Pause Issuance Amid Increased CautionTanya Angerer
Borrowers in the Asia-Pacific region are set to pause sales of dollar-denominated bonds for a fourth straight business day as investor caution mounts before year-end holidays and amid the worst performance in five years.
The drought in offerings is the longest stretch since a five-day lull through Nov. 14, according to data compiled by Bloomberg. Dollar bonds in Asia have lost 0.03 percent this year, the worst performance for any similar period since 2008, according to Bank of America Merrill Lynch indexes.
South Korea’s Dongkuk Steel Mill Co. was the last company to sell dollar debt in the region, raising $100 million in a sale of floating-rate notes due 2015 on Nov. 22, Bloomberg-compiled data show. Markets in the U.S. are shut today for Thanksgiving.
“Thanksgiving is the main reason for the lull since yesterday. But in general the market seems quite cautious as we approach the end of the year,” said Louisa Lam, a Hong Kong-based analyst at HSBC Holdings Plc. “Most investors are sitting on the sidelines in order to get ready for next year’s deals.”
Hong Kong telecommunications company Pacnet Ltd., China XD Plastics Co., Xinyuan Real Estate Co. and a Bank of China Ltd. unit are all planning securities in the U.S. currency, according to people familiar with the matters.
The cost of insuring corporate and sovereign bonds from non-payment in Asia and Australia outside Japan dropped, according to traders of credit-default swaps.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan decreased 1 basis point to 132 basis points as of 8:27 a.m. in Hong Kong, Australia & New Zealand Banking Group Ltd. prices show. The measure has ranged from 99.5 basis points and 177.8 basis points this year, according to data provider CMA.
The Markit iTraxx Australia index fell 0.5 of a basis point to 100 as of 11:34 a.m. in Sydney, according to Westpac Banking Corp. The benchmark is set to close down 5.1 basis points since Oct. 31, 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 was little changed at 79.75 basis points as of 9:26 a.m. in Tokyo, Citigroup Inc. prices show. The gauge is poised for its third straight weekly fall, 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. A basis point is 0.01 percentage point.