Asia Dollar Debt Costs Rise to Month-High; BlueScope Scraps Sale
Yield premiums on Asian bonds in dollars rose to the most in a month as concern about U.S. government finances sapped risk appetite. Australia’s BlueScope Steel Ltd. (BSL) scrapped a $300 million offering.
Spreads on dollar-denominated notes sold by Asian borrowers rose to 269 basis points more than Treasuries on Nov. 9, the most since Oct. 11, JPMorgan Chase & Co. indexes show. Investors didn’t offer terms and conditions that met BlueScope’s expectations, amid volatility in credit markets, Australia’s largest mill said in a statement about its canceled deal today.
Relative yields rose on all dollar bonds sold last week by Asian companies, data compiled by Bloomberg show. The spread on Hutchison Whampoa Ltd.’s $1 billion of notes due 2017, the largest note offered, widened 10 basis points to 145, according to prices from Royal Bank of Scotland Group Plc. U.S. President Barack Obama is focusing on the so-called fiscal cliff that will impose spending cuts and higher taxes from 2013 if Congress can’t agree to reduce the country’s deficit.
“Issuance from now to the year’s end is likely to slow dramatically,” said Owen Gallimore, the Singapore-based head of Asia credit strategy at Australia & New Zealand Banking Group Ltd. (ANZ) “Year-end profit taking and the pending fiscal cliff politics are sapping both secondary and primary performances.”
Bond risk in Asia and Australia was little changed today, according to traders of credit-default swaps. Better-than- expected Chinese trade and industry data have helped stabilize markets, Gallimore said.
China’s industrial production rose 9.6 percent in October from a year earlier, the National Bureau of Statistics said on Nov. 9, more than the 9.4 percent median estimate of 33 analysts surveyed by Bloomberg News.
Gemdale Corp. (600383) is discussing a yield of about 7.375 percent with investors for dollar debt due 2017, according to a person familiar with the matter who asked not to be identified because the details are private.
China Aoyuan Property Group Ltd. is talking to investors about a sale of five-year bonds, according to a person familiar with the matter. Far East Consortium International Ltd. meanwhile plans to sell about $200 million of bonds due 2017 at 5.5 percent, a person with knowledge of that deal said last week.
Mingfa Group International Co. plans to meet investors in Hong Kong and Singapore from tomorrow after hiring Credit Suisse Group AG, Citigroup Inc., ICBC International and RBS, according to a person familiar with the matter. Allianz SE (ALV), the German insurer, will also meet investors in the two cities this week to discuss a possible sale of bonds in the U.S. currency, a person familiar with that matter said.
The Markit iTraxx Australia index was unchanged at 146.5 as of 11:25 a.m. in Sydney, according to Westpac Banking Corp. (WBC) prices. The gauge advanced 10 basis points last week, according to data provider CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan was unchanged at 123.5 as of 8:35 a.m. in Hong Kong, Royal Bank of Scotland Group Plc prices show.
The Markit iTraxx Japan index rose one basis point to 200 basis points as of 9:15 a.m. in Tokyo, Citigroup prices show. The measure has traded between 196 and 227.5 this quarter, according to CMA.
The 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 contracts pay the buyer face value in exchange for the underlying securities if a borrower fails to meet its debt agreements.