A flurry of Asian issuers – particularly North Asian entities – has hit the global debt capital markets amid speculation that the US Federal Reserve will further delay the tapering of its bond-purchase programme, leading to a decline in US Treasury (UST) yields.
Haitong International Finance raised a whopping $900 million five-year debut bond with a coupon of 3.95% on Tuesday. The Reg S registered deal was priced 12.5bp tighter than its initial price guidance of Treasuries plus 287.5bp, according to a term sheet seen by FinanceAsia.
“The market is very receptive and selective on good names,” said a source close to the deal. “The quality of investors is very good and enabled us to manage the pricing very well.”
Haitong’s bond was five times oversubscribed from more than 280 accounts. Asset managers subscribed to 43%, followed by private banks with 23%, financial institutions 21%, insurers 11% and others 2%. Asian investors took a huge chunk - 82% - followed by Europe with 15% and offshore US 3%.
Treasuries rallied the most in a month yesterday after a report showed US payrolls climbed less than projected in September, growing by 148,000 versus a median forecast of 180,000 by 93 economists in a Bloomberg survey. As a result, the benchmark US 10-year yield touched 2.5% today, the lowest since July 23.
“The rally in USTs has helped buoy fixed-income sentiment but markets also sense that this respite might be temporary, as many expect tapering to start in March 2014,” said Ashish Agrawal, fixed-income strategist for Asia ex-Japan at Credit Suisse. “Issuers could use this rally and bullish sentiment to raise funds and hedge against the risk of a deterioration in sentiment and demand once again.”
Based on these factors, a series of issuers have come to the dollar market, with the latest two being Chinese real estate companies.
Evergrande and China Overseas Land are marketing dollar transactions, with the former raising a five-year high-yield note, with a callable option in the third year and the latter a triple-tranche deal with five-, 10- and 30-year tenors.
Evergrande’s 144A/Reg S notes have an initial price guidance of 9% while China Overseas’ five, 10- and 30-year tranches have a guidance of 240bp, 325bp and 310bp above Treasuries respectively. China Merchant Securities, Deutsche Bank, Goldman Sachs and JPMorgan are sale managers of the former transaction, while BNP Paribas, Bank of China International, CLSA, HSBC, JPMorgan are joint-lead managers of the latter.
Additionally, HDFC Bank – India’s third-biggest lender by assets – is following in the footsteps of Canara Bank, which issued the nation’s first dollar bond in six months on October 12.
HDFC Bank is looking to issue a dollar benchmark three-year bond, according to a term sheet. The Reg S deal, which is part of the financial institution’s $2 billion medium-term note programme, has an initial price guidance of 280bp over Treasuries.
Bank of America Merrill Lynch, Barclays, JPMorgan and Standard Chartered are joint bookrunners of HDFC Bank’s Baa2/BBB- rated deal.
Bank of China, Deutsche Bank and Haitong International were the joint global coordinators of Haitong’s bond. Barclays, HSBC, ICBC International, Nomura and Standard Chartered Bank were the active joint bookrunners of the deal.
