Singapore. Pertamina Persero and Bright Food Group Co. are among companies marketing US dollar-denominated bonds after average yields in Asia outside Japan declined to a record low last week.
Indonesia’s state-owned oil company is offering 10-year notes yielding about 4.5 percent and 30-year securities at about 5.8 percent, according to a person familiar with the matter who asked not to be identified because the terms aren’t set.
Bright Food, which is based in Shanghai and has operations from sugar to dairy and wine, plans to sell five-year bonds at a spread of about 250 basis points more than similar-maturity Treasuries, another person said.
Borrowing costs for companies in the region touched 3.765 percent on May 9, the least in Bank of America Merrill Lynch index data going back to 1997.
The premium investors demand to hold Asian corporate dollar bonds over Treasuries dropped to 273 basis points that day, an almost two-month low, JPMorgan Chase & Co. figures show.
Pertamina last sold debt in the US currency in April 2012, according to data compiled by Bloomberg.
“Spreads on corporate bonds still look attractive,” said Brayan Lai, a Singapore-based analyst in emerging-market credit trading at Jefferies Group LLC. “The Federal Reserve will probably maintain the pace of its asset purchases and that will help demand for credit.”
The Fed is currently buying $85 billion of debt each month and central bank officials have been debating whether to expand or curb the program.
Federal Reserve Bank of Philadelphia President Charles Plosser said last week he would favor scaling back the pace of stimulus, which has pumped up the central bank’s balance sheet to $3.32 trillion.
Bright Food’s bond sale comes before it’s due to repay a $300 million loan in October, part of $850 million borrowed last year to buy part of British cereal maker Weetabix, according to data compiled by Bloomberg.
The company also signed a $550 million term loan to fund the acquisition. That matures in 2015 and pays a margin of 230 basis points more than the London interbank offered rate, the data show.
Ten banks were hired to help Bright Food sell its Reg S dollar securities, the person familiar with the matter said. The notes are expected to be rated Baa3 by Moody’s Investors Service and BBB- by Standard & Poor’s and Fitch Ratings Ltd., the lowest investment-grade ranking.
Pertamina selected Barclays Plc, Citigroup Inc. and Royal Bank of Scotland Group Plc to manage its issue, which is set to be rated Baa3 by Moody’s, BB+ by S&P and BBB- by Fitch.
The yield premium on the company’s May 2022 bonds was last at 249 basis points more than similar-maturity Treasuries, compared with an issue spread of 299.10 basis points when they were sold in April 2012, Bloomberg-compiled data show.
The average spread on notes from borrowers in Asia’s oil and gas industry declined 9 basis points this quarter to 241 as of May 10, according to JPMorgan indexes.
IFC Development Ltd., owned jointly by Sun Hung Kai Properties Ltd., Henderson Land Development Co. and Hong Kong & China Gas Co., is also planning bonds denominated in the US currency, a separate person said, also asking not to be identified because the terms aren’t set.
IFC Development is offering six-year securities at a spread of about 180 basis points more than comparable US government debt. The notes may be rated A2 by Moody’s and A by S&P.
The cost of insuring corporate and sovereign bonds against non-payment rose on Monday in the Asia-Pacific region outside Japan, according to credit-default swap traders.
The Markit iTraxx Asia index of 40 investment-grade borrowers outside Japan increased 3 basis points to 101 basis points as of 8:51 a.m. in Singapore, Royal Bank of Scotland Group Plc prices show.
The benchmark is headed for its highest since May 6, according to data provider CMA.
The Markit iTraxx Australia index advanced 1.5 basis points to 100.5 as of 9:00 a.m. in Sydney, according to Westpac Banking Corp. prices.
The measure is poised for its highest close since May 2, according to CMA, which is owned by McGraw-Hill Cos. and compiles prices quoted by dealers in the privately negotiated market.
The Markit iTraxx Japan index dropped 3 basis points to 71 basis points as of 9:33 a.m. in Tokyo, according to Citigroup Inc. prices. The gauge is set for its biggest one-day decline since May 3 and its lowest close since May 21, 2008, according to CMA.
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.