Asia bond sales to rise 10% this year after record start

Offerings denominated in the G3 currencies of Euros, yen or dollars in the region outside Japan total $30.1 billion since December 31, or 23 per cent more than in the same period of 2013, according to data compiled by Bloomberg.

By (Bloomberg)

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Published: Tue 25 Feb 2014, 1:27 PM

Last updated: Sat 4 Apr 2015, 4:40 AM

International bond sales in Asia will increase 10 per cent in 2014 after the busiest start to a year on record, according to Citigroup Inc, the top-ranked arranger in that period.

Offerings denominated in the G3 currencies of Euros, yen or dollars in the region outside Japan total $30.1 billion since December 31, or 23 per cent more than in the same period of 2013, according to data compiled by Bloomberg. Note sales in emerging markets globally by contrast fell 17 per cent to $137.5 billion. Indonesia hired three banks on Monday to help arrange investor meetings starting February 26, a person familiar said.

“G3 currency volumes in Asia will rise by about 10 per cent this year,” said Amit Sheopuri, the Hong Kong-based co-head of capital markets at Citigroup. “Despite tapering, we’ve seen emerging-market Asia, unlike emerging markets in general, perform much better compared to 2013.”

Since the US Federal Reserve announced in December it would begin cutting its bond purchases, yield premiums for dollar debt in Asia have narrowed 11 basis points to 278.6 basis points on February 21, HSBC Holdings Plc indexes show. Spreads jumped to a one-year high of 339.7 on June 25 after plans to reduce stimulus were first mooted. US currency borrowing costs averaged 4.4 per cent on February 19, the least since November 1.

New York-based Citigroup has helped to arrange 15.1 per cent of G3-currency bond sales in Asia this year, followed by HSBC with 11.8 per cent and Bank of America Corp with 10.4 per cent. HSBC has topped the league table for every full year since 2009.

Deutsche Bank AG, Bank of America and Citigroup were hired by Indonesia’s government to arrange a series of bond investor meetings in Asia, Europe and the US, the person familiar with the matter said today, asking not to be identified because the details are private.

Citigroup was the only lender to help to arrange all three sovereign bond sales this year, for Indonesia, the Philippines and Sri Lanka. A total of $6.5 billion was raised in the five days ended January 10, the region’s busiest week on record.

Citigroup is also topping the arranger charts for high- yield, or junk, corporate bond issuance in Asia outside Japan. It holds a 15.5 per cent share of the market, followed by UBS AG with 14.9 per cent and HSBC with 12.2 per cent. In the same period of 2013, UBS ranked No 1, followed by HSBC and Citigroup.

Investors can also expect to see more bank capital issuance out of China this year in the dollar market, according to Sheopuri. Industrial & Commercial Bank of China Ltd sold Asia’s first Basel III-compliant dollar-denominated bond in October last year. JPMorgan Chase & Co forecasts China’s four biggest lenders will sell as much as $10 billion of Basel III debt offshore in 2014.

AIA Group Ltd, the second-largest insurer based in Asia, may consider a sale of dollar bonds after meetings with fixed- income investors in the US which start on Monday. Citigroup, Deutsche Bank, HSBC and Morgan Stanley were hired to arrange those updates.

“Many of our debt issuers are clients across our franchise,” Sheopuri said. “This consistency of client coverage has contributed to a strong result.”

Total dollar bond issuance in the region jumped to $3.4 billion last week versus $800 million in the five days to February 14. China Aluminium International Engineering Corp sold $300 million of 6.875 per cent perpetual securities on February 21.

The cost to insure corporate and sovereign bonds in Asia against non-payment declined on Monday, according to credit-default swap traders.

The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan fell 2 basis points to 138 basis points as of 8:33am in Singapore, Standard Chartered prices show. The gauge, which has ranged from 129.2 basis points to 153.5 basis points this year, is set to fall for the second straight day, according to data provider CMA.

The Markit iTraxx Australia index advanced 0.25 basis points to 101.5 as of 11:10am in Sydney, according to Citigroup prices. The benchmark, which has ranged from 96.7 basis points to 109.6 basis points this year, is set to increase for a fourth consecutive day, CMA prices show.


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