Asian G3 bond markets are expected to have a busy second half in March with several deals anticipated to come to market as sentiment improves amid an apparent easing of tensions between Russia and Ukraine.
The high-yield space looks especially promising. Guangdong-based Logan Property and Indonesia’s Berau Coal are in the midst of talks over potential dollar-denominated deals, according to bankers not involved on the transactions.
Bank of China, Citi and Deutsche Bank are said to be in discussions with Logan Property, while Citi and Standard Chartered (StanChart) with Berau Coal, add the bankers. Citi declined to comment on both transactions, while StanChart declined to comment on the latter.
“We should see a fair bit of activity towards the later part of the month,” said a Singapore-based syndicate banker to FinanceAsia. “Treasuries have rallied over the past few days but it’s an open window for issuers in any case.”
The potential dollar-denominated transactions come off the back of a relatively quiet earlier half of the week when US Treasuries rallied heavily when Russia seized control of Ukraine’s Black Sea region Crimea, spurring demand for safe haven assets.
On March 4, US Treasury 10-year yields dropped 5bp to 2.6% after touching 2.59%, the lowest since February 4, but have since recovered to 2.69% – the biggest gain since November – a day after, according to Bloomberg data.
Sovereigns to come
Republic of Indonesia appointed Bank of America Merrill Lynch, Citi and Deutsche Bank to arrange a series of fixed-income meetings in Asia, Europe and the US, which began on February 26, according to sources close to the deal. This suggests that the sovereign could be next to come to market with a dollar bond.
Pakistan has also mandated a dollar bond offering to take place sometime in the first quarter, according to Reuters on January 8. The sovereign first circulated a request for proposals last year as it looked to return to the dollar market after a seven-year absence.
“The sovereign space will still remain pretty active,” said a syndicate banker.
Safe haven demand
Demand for safe haven assets rose after Russian president Vladimir Putin won parliamentary backing to send troops into Russia’s southern neighbour on March 3. Ukraine mobilised its army reserves as it sought international economic aid, saying that Russia’s move constituted “an act of war”.
Last week, high-yield cash spreads in the US tightened by 12bp while those in Asia widened by 8bp, according to Morgan Stanley. Investment grade cash spreads in the US tightened by 1bp and those in Asia remain unchanged during the same period.
On March 5, syndicate bankers note that Asia investment grade space is now 2bp-4bp tighter amid speculation that the crisis in Ukraine will ease, while high-yield cash spreads remain unchanged.
“All the developments in Ukraine are being very closely monitored,” said a Hong Kong-based syndicate banker. “Yesterday evening (March 4) Putin had a press conference in which he said that Russia doesn’t intend to invade properly in Ukraine. This received very good response from investors on both sides – Europe and the US.”
