Korea Development Bank is marketing a sale of dollar-denominated bonds, adding to the busiest week for Asia-Pacific offerings since July, as borrowers lock in funding before the European Central Bank’s meeting tomorrow.
The South Korean lender is offering 10-year bonds paying about 170 basis points more than similar-maturity Treasuries, a person familiar with the matter said today. Yields on Asian dollar debt fell to 4.51 percent last week, the lowest since November 2010, Bank of America Merrill Lynch indexes show.
Borrowers from Singapore to Australia and Japan sold $5.5 billion of debt yesterday, already the busiest week in seven, data compiled by Bloomberg show. The total is set to rise with sales in progress from SP PowerAssets Ltd. and Japan Finance Organization for Municipalities, while at least four Korean issuers are considering offerings after the nation’s sovereign rating was upgraded. ECB President Mario Draghi may reveal a bond-buying program tomorrow after a monthly policy meeting.
“Yesterday and today is a sweet spot for issuers,” Mark Reade, a credit desk analyst at Credit Agricole SA in Hong Kong, said. “It’s after the U.S. summer holidays but avoids any potential volatility triggered by Thursday’s ECB meeting and Friday’s U.S. payroll data.”
Moody’s Investors Service raised South Korea’s rating by one level to Aa3, the fourth-highest ranking, on Aug. 27, citing Asia’s fourth-largest economy’s strengthened resilience to crises. Yang Seung Weon, the Seoul-based head of KDB’s global funding team, declined to comment on any bond sale.
Korea Expressway Corp. hired four banks to help with a dollar bond sale, with other details of the issue yet to be decided, a person familiar with the matter said today. Nonghyup Bank is considering an offering in the U.S. currency later this month, Geum Jun Tae, a senior manager with the lender’s treasury department, said on Aug. 21.
Korea Hydro & Nuclear Power Co. is also planning a sale, a person familiar with the matter said on Aug. 23, while Hyundai Motor Co. has hired three banks to help raise as much as $1 billion next month, Korea’s Maeil Business Newspaper reported last week, citing an unidentified official at the company.
“KDB’s sale should be well-supported and it’s the first trickle from what we expect to be an active Korean dollar pipeline during September,” Reade said.
Singapore’s SP PowerAssets is marketing a 10-year bond at about 130 basis points more than similar-maturity Treasuries, according to a person with knowledge of that sale. JFM is offering its five-year bond to yield 75 basis points to 80 basis points more than mid-swaps, another person said.
Asian bond risk fell to the lowest level in more than a week yesterday, 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 rose 1.5 basis points to 150.5 as of 8:33 a.m. in Hong Kong, according to prices from Royal Bank of Scotland Group Plc.
The Markit iTraxx Australia index was little changed at 166.5 basis points as of 11 a.m. in Sydney, according to Australia & New Zealand Banking Group Ltd. The measure closed at a four-day low of 164.6 basis points yesterday, CMA prices show. A basis point is 0.01 percentage point.
The Markit iTraxx Japan index fell 0.5 basis point to 206.5 as of 9:38 a.m. in Tokyo, Citigroup Inc. prices show. The index is headed for its lowest close since Aug. 29, 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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