Bloomberg News

Longfor, Nippon Life Market Dollar Bonds; Asia Debt Risk Rises

October 11, 2012

Longfor Properties Co. and Nippon Life Insurance Co. are marketing U.S. dollar-denominated bonds. Debt risk in the Asia-Pacific region rose after Spain’s sovereign rating was downgraded by Standard & Poor’s.

Longfor is considering pricing seven-year notes to yield about 7.5 percent while Nippon Life is offering 30-year bonds to investors at 5 percent to 5.25 percent, according to people familiar with each deal, who asked not to be identified because the terms aren’t set. Longfor’s debt can be bought back by the company after four years while Nippon Life’s securities can be called after 10 years, the people said.

Bond risk increased in Asia, Australia and Japan after Spain’s credit rating was cut to one level higher than junk yesterday by S&P, which cited “significant risks” to the country’s growth and uncertainty about euro-zone policy. Investors are channeling money into countries outside the common currency, with emerging market bond funds taking another $1 billion in the week to Oct. 3, according to EPFR Global.

“Fund flows into emerging markets are still strong so bond supply in Asia will continue to be well-absorbed,” said Krishna Hegde, the Singapore-based head of Asia credit research at Barclays Plc. “Despite concerns about Spain, funds need to deploy their money.”

Thai oil and gas explorer PTT Pcl (PTT) and Russia’s Home Credit & Finance Bank plan to meet debt investors in Asia, people with knowledge of the details said today. Home Credit may seek to sell lower tier 2 bonds in dollars after the talks, the person familiar said.

Credit Risk

Sales of dollar bonds from Asia outside of Japan total $3.4 billion this month, bringing year-to-date volumes to $98.1 billion, an 87 percent increase on the same period of 2011, according to data compiled by Bloomberg.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan advanced 2.5 basis points to 134 basis points as of 8:34 a.m. in Hong Kong, Credit Agricole SA (ACA) prices show. The measure is on course for its highest close since Oct. 2, according to data provider CMA.

The Markit iTraxx Australia index added 2 basis points to 158.5 as of 11:34 a.m. in Sydney, according to Credit Agricole. The benchmark is set for its highest close since Oct. 1, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

Japanese Bonds

The Markit iTraxx Japan index rose 1 basis point to 227.5 basis points as of 9:34 a.m. in Tokyo, Deutsche Bank AG prices show. The gauge rose to a high this year of 229.5 on Sept. 26, the CMA data show.

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. A basis point is 0.01 percentage point.

To contact the reporters on this story: Rachel Evans in Hong Kong at revans43@bloomberg.net; Tanya Angerer in Singapore at tangerer@bloomberg.net

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net


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