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Asia Debt Risk Tumbles to 16-Month Low; Taqa Plans Dollar Bonds

November 28, 2012

Asia debt risk is poised to fall to its lowest in 16 months as investors direct cash into emerging markets. Abu Dhabi National Energy Co., known as Taqa (TAQA), is considering selling U.S. dollar-denominated bonds.

A gauge measuring the cost of insuring corporate and sovereign bonds in Asia from non-payment is set for its lowest close since July 5, 2011, prices from Royal Bank of Scotland Group Plc and data provider CMA show. Taqa, which is 72.5 percent indirectly-owned by the Abu Dhabi government, plans to meet investors in Asia, London and the U.S. about a possible bond sale, according to a person familiar with the matter who asked not to be identified because the terms aren’t set.

Congressional leaders will meet Treasury Secretary Timothy F. Geithner today to discuss automatic tax increases and spending cuts that are slated to come into effect next year. Three out of four global investors expect politicians to avert the so-called fiscal cliff, according to a Nov. 27 Bloomberg global poll. More than $1 billion flowed into both emerging markets bond and equity funds in the week to Nov. 21, according to data provider EPFR Global.

“The market is still buying with month-end approaching and relentless inflows into Asia,” said Luc Froehlich, a portfolio manager with Manulife Asset Management Ltd.’s Asia fixed-income team, which oversees more than $39 billion. “Lots of people have to put to work the cash they’ve received.”

Mongolia Debut

Sales of dollar bonds in Asia outside of Japan total $12.5 billion this month, a 5 percent decrease on $13.1 billion in October and bringing issues for the year to $160.8 billion, according to data compiled by Bloomberg.

Mongolia raised $1.5 billion selling five- and 10-year notes yesterday, pricing the securities to yield 4.125 percent and 5.125 percent respectively, the data show. The sale was the Mongolian government’s first in the U.S. currency.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan decreased one basis point to 112 as of 9:00 a.m. in Hong Kong, RBS prices show. The gauge is on track to fall 5.9 basis points this month, according to CMA.

Australia, Japan

The Markit iTraxx Japan index dropped four basis points to 167 as of 9:05 a.m. in Tokyo, Deutsche Bank AG prices show. The index, on track to fall 36 basis points this month and 19.8 this year, is headed for its lowest since April 12, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.

The Markit iTraxx Australia index was little changed at 133 basis points as of 11:27 a.m. in Sydney, according to Australia & New Zealand Banking Group Ltd. The measure is on track to fall 6.1 basis points this month and 47.5 basis points this year, according to CMA prices in New York.

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. A basis point is 0.01 percentage point.

To contact the reporters on this story: Rachel Evans in Hong Kong at; Tanya Angerer in Singapore at

To contact the editor responsible for this story: Shelley Smith at

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