China

The International Finance Corp (IFC) this week paid more for its return to the dim sum bond market than it did in its debut last year. Investors are seeking higher yields to compensate for diminishing expectations of the appreciation of the renminbi.

Investors will press high yield issuers of dim sum bonds to incorporate covenants in their future bond issues after Global Bio-Chem warns of contact breach.

The potential rise in US dollar interest swap rates to 2.7% and Treasury yields to 2.5% by year-end could lead to fewer bond inflows into the Asian sovereign bond market, believes Crédit Agricole.

Chinese credit rating agencies may not have the strongest reputation, but as they begin to drift offshore, their presence may inadvertently help foster a high yield market for mainland corporates.

Tata Power raised Rs15bn ($269m) last week from a rare corporate hybrid issue in the rupee market, pulling off the longest maturity ever achieved for an Indian corporation in the domestic market.

Singapore’s domestic bond market heated up last week as three issuers raised a combined S$1bn ($798.5m) and attracted around S$14.5bn of demand from investors, underscoring the depth and liquidity of the city-state’s debt market, which remains busy despite the summer break.

The Republic of Indonesia aims to raise $7.8bn from both foreign and domestic investors by the end of the year to fund its budget deficit. It is considering issuing around $2bn of that from both the Samurai and global sukuk markets, said a government official.

Banks will continue to spearhead dim sum issuance for the rest of the year while corporates take a breather as yields continue to converge in the onshore and offshore renminbi markets.

Malaysian mobile phone operator Celcom Axiata raised MR5bn ($1.6bn) from selling Islamic bonds this week, closing the biggest-ever sukuk with a credit rating in the country’s history.

The relative value of offshore RMB bonds compared to both onshore and US dollar bonds will remain unattractive as downward pressure on Chinese government bonds’ yield curves escalates, says BoA-Merrill.