Maybank, Olam Market U.S. Dollar Debt as Asia Bond Risk Falls
Malayan Banking Bhd. (MAY), Malaysia’s biggest lender known as Maybank, Olam International Ltd. (OLAM) and Kasikornbank Pcl (KBANK) are marketing dollar-denominated debt today as bond risk in Asia declines to a 13-month low.
Maybank is offering 10-year subordinated notes, which can be bought back by the lender after five years, to yield about 275 basis points more than Treasuries, said a person familiar with the matter, who asked not to be identified because the terms aren’t set. Bangkok-based Kasikornbank is marketing 5 1/2- year securities at a spread of about 250 basis points, while Olam, the Singapore-based food commodity supplier, may pay about 6 percent for five-year notes, two other people said.
Perceptions of creditworthiness in the region fell for an eighth day, the longest streak of declines in seven months, amid speculation the U.S. Federal Reserve will announce a third round of stimulus measures when policy makers meet today. Asia-Pacific borrowers have sold $15 billion of dollar bonds this month, up from $2.4 billion in the same part of August, as issuers from China to Korea and Thailand priced deals.
“Investor appetite for risk has come back in a big way and that’s been reflected in the response to the large amount of issuance we’ve seen over the last week,” said Krishna Hegde, head of Asia credit research at Barclays Plc. “Participants didn’t expect such a sharp improvement in sentiment and they’re now more comfortable putting cash to work.”
The cost of insuring the region’s corporate and sovereign bonds against default decreased, with the Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan falling 1 basis point to 122 basis points as of 8:37 a.m. in Hong Kong, Credit Agricole SA (ACA) prices show. The gauge is poised for its lowest close since Aug. 2, 2011, CMA prices show.
U.S. dollar bond sales by companies in the Asia-Pacific region total $6.6 billion this week and $8.4 billion last week, according to data compiled by Bloomberg.
Trade & Development Bank of Mongolia LLC is also marketing a sale of three-year dollar bonds today, a person familiar with the matter said. The Reg S notes are being offered to investors to yield about 8.75 percent, the person said.
“The Federal Reserve policy decision tonight is the immediate focus for markets,” Barclays’ Hegde said. “If the message is dovish and more asset purchases are announced, that could improve sentiment further going into next week.”
The Markit iTraxx Australia index dropped 1 to 144 as of 10:05 a.m. in Sydney, Westpac Banking Corp. (WBC) prices show. The Markit iTraxx Japan index decreased 6 to 184 as of 9:07 a.m. in Tokyo, according to Deutsche Bank AG prices.
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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