Asia G3 DCM brace for a busy January

A flurry of bond deal announcements in the first week of 2014 has set the stage for what could be a busy January, with Sovereign Sri Lanka and a Chinese property company marketing dollar notes.
Sri Lanka is in the midst of marketing a five-year dollar benchmark bond - the country’s first since July 2012.
Sri Lanka is in the midst of marketing a five-year dollar benchmark bond - the country’s first since July 2012.

Sovereign Sri Lanka and Guangzhou-based R&F Properties are marketing five-year dollar benchmark bonds while Kaisa Group has announced a tap issue of its existing 2018 notes – all of which are slated to close as early as Monday.

The flood of bond issuance is spurred by improved market sentiment after the Federal Reserve (Fed) decided to cut its monthly bond purchases to $75 billion from $85 billion in December, suggesting headwinds that have held back the US economy may be abating.

This resulted in the stabilisation of US Treasuries (USTs), which were extremely volatile over the past few months when 10-year rates would spike by up to 10bp on a daily basis, note experts.

“The uncertainty of Fed tapering is behind us for now, and with Treasury yields adjusting to where it should be reflecting the US’ economic backdrop and with the backlog of debt supply since December, it is going to be an extremely busy month for Asia’s bond markets,” said a Hong Kong-based syndicate banker.

The benchmark 10-year note yield reached 3.05% on January 3, the highest since July 2011 before ending the day at 2.99%, according to Bloomberg data. The 10-year yields also traded within a 4.28bp range on January 4, which is the narrowest since December 13.

As a result of the improvement in general market sentiment, some syndicate bankers believe that total Asia ex-Japan G3 bond supply for January could reach up to $20 billion, which is just shy of 2013’s $23.7 billion and not too bad given the higher rates environment.

“We should expect to see more longer duration issuance coming to the market and expect them to be well received because yields are higher and more importantly, the volatility of the UST benchmark is much lower than what we saw in the last three months,” said the syndicate banker. “We are going to see quasi-sovereigns coming to the market fairly shortly as well, plus bank financials and a lot of issuers from China.”

Latest dollar issuance

January or the start of the year is generally strong for primary markets, highlight bankers.

Sri Lanka is in the midst of marketing a five-year dollar benchmark bond at a price guidance of 6.25% - the country’s first since July 2012, and could be the start of more sovereign issuances this year. Citi, HSBC, Standard Chartered and UBS are the joint bookrunners of the transaction.

The Chinese property space also started the year strong. Guangzhou-based subsidiary of R&F Properties, Trillion Chance, is also marketing a five-year non-call five dollar benchmark bond at an initial price guidance of 8.75% area, according to a term sheet. The transaction will be credit enhanced by a keepwell deed and deed of equity interest purchase undertaking.

Citi, CLSA, Deutsche Bank, Goldman Sachs and Standard Chartered are the joint global coordinators and bookrunners of R&F’s notes. Other bookrunners include Bank of America Merrill Lynch, HSBC and Morgan Stanley.

Shenzhen-based Kaisa Group has reopened a tap – a procedure that allows borrowers to sell bonds from past issues – for its March 2018 dollar notes at the 100.5 area. Citi, Credit Suisse and HSBC are the sale managers.

Additionally, Indian public sector financial institution Bank of Baroda has mandated Bank of America Merrill Lynch, Barclays, Citi, JPMorgan and Standard Chartered as joint bookrunners and lead managers to arrange a series of fixed income investor meetings in the United States, Europe and Asia commencing January 8. A benchmark dollar Reg S/144a bond offering may follow subject to market conditions.

¬ Haymarket Media Limited. All rights reserved.
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