Asia Dollar Bond Sales Jump Eightfold on Sinopec $5 Billion Deal

Bond sales in Asia are set for the busiest week in more than two months as the earnings season draws to a close.

Offerings in the region outside Japan jumped by almost eight times to $6.25 billion from the previous five business days, according to data compiled by Bloomberg. Indonesian real estate developer PT Lippo Karawaci is marketing a $150 million eight-year security at about 7.25 percent, according to a person familiar with the matter, who asked not to be identified because the details are private.

China Petrochemical Corp., parent of Asia’s largest oil refiner and known as Sinopec Group, led issuances this week after raising $5 billion from the biggest offering of notes in the U.S. currency by an Asian issuer in more than a decade. Dollar borrowing costs in Asia fell to a four-week low of 5.06 percent on April 1, JPMorgan Chase & Co. data show.

“With earnings season now in the rear-view, that paves the way for a surge in supply from Asian corporates,” said Mark Reade, a Hong Kong-based desk analyst at Mizuho Securities Asia Ltd. “Investors are hungry for non-China diversification and a broad range of issuers from the likes of India, Indonesia, Korea and Thailand look set to hit the market in coming weeks.”

PT Pertamina Persero met with investors this week, while State Bank of India is planning a possible dollar bond sale.

Sinopec Group offered notes with three-, five- and 10-year maturities, matching the amount issued in November 2003 by Hutchison Whampoa Ltd., the Hong Kong conglomerate controlled by Li Ka-shing, Asia’s richest man.

Default Risk

The cost of insuring Asian corporate and sovereign bonds from default has declined this week, according to traders of credit-default swaps.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan slid by 1.5 basis points to 124.5 basis points as of 8:30 a.m. in Hong Kong, according to Standard Chartered Plc prices. The benchmark is on track for its lowest close since April 2, when it touched a six-month low, and set to fall 3.7 basis points this week, according to data provider CMA.

The Markit iTraxx Australia index slipped 0.5 basis point to 98.5 as of 11:32 a.m. in Sydney, according to Australia & New Zealand Banking Group Ltd. prices. The gauge has fallen 2.3 basis points this week, the most since the week ending March 21, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

Japan Risk

The Markit iTraxx Japan index declined 0.3 basis point to 83.3 basis points as of 9:34 a.m. in Tokyo, Citigroup Inc. prices show. The index is on track for its lowest close since April 2 after rising yesterday for the first time since March 20, CMA data show.

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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