Hope for a thawing bond pipeline

New bond issues announced after the US Fed's surprisingly large rate cut last week have sparked hope that Asia's G3 bond markets might soon emerge from the duldrums.
Last week sparked hope that AsiaÆs frozen bond pipeline is beginning to thaw following the US Federal ReserveÆs unexpected half-a-percent cut in the policy and discount rate on September 18.

In the high-yield market, Chinese property developer Hong Long priced a $90 million bond with warrants on Thursday, although the terms remain unconfirmed.

Meanwhile, Standard Chartered succeeded in raising $1 billion on Friday via a 10-year lower tier-2 144a transaction. The issue, managed by joint leads Goldman Sachs, JPMorgan, Standard Chartered and UBS, priced with a semi-annual coupon of 6.4% at 99.781. Rated A3 by Moody's, the bonds will yield 6.43%.

On a much smaller scale, South KoreaÆs National Agricultural Cooperative Federation (NACF) also issued $30 million worth of bonds on Thursday via a one-year floating rate note. The deal priced with a coupon of 25bp over three-month Libor, payable quarterly in arrears. NACF has recently mandated Calyon, Morgan Stanley and UBS to handle a benchmark issue in the coming weeks.

ôThe environment has changed. The FedÆs decision has triggered a whole new ball game, and we should see issuance levels pick up very soon,ö says one syndicate banker.

Asian corporate credit and CDS spreads closed significantly following the September 18 announcement, with the global rally in risky assets accompanying rising interbank liquidity and falling volatility, according to a BNP Paribas report.

Since then, inflation concerns have risen. A record high in oil prices also fuelled worries with Asian bonds weakening on Friday. The JPMorgan Emerging Markets Bond Index Plus indicated yield spreads to be 3bp wider at 196bps over US Treasuries, according to Reuters.

Nonetheless, an improvement in sentiment towards emerging markets will encourage further debt offerings, the big question is: when will things pick up? Bankers remain divided on this point. They are only looking as far as next week which is likely to bring more volatility. ôWe may have volatile trade next week, depending on whether US data points to a recession or not," says a trader in the Reuters report.
¬ Haymarket Media Limited. All rights reserved.
Share our publication on social media
Share our publication on social media