Asian and Chinese Bond markets

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The Treasury bond market weakness is tied in part to a poor US Treasury auction of $42 billion in five-year notes at Wednesday’s auction with a high rate of 2.605% on a bid-to-cover ratio of 2.55. Primary dealers were awarded $20.75 billion, and indirect bidders including foreign central banks were awarded $16.6 billion. But this took a toll on US Treasury prices. Interestingly enough, China has a bond offering of its own after the Chinese Ministry of Finance said it would issue a batch of 10-Year book-entry Treasury Bonds with a Par value of 26 billion yuan or about $3.8 billion U.S. dollars.

Book-entry bonds are very similar to Treasury bonds issued here in the U.S with semi-annual accrued interest payments. The rate on these will be market-dependent after issuance, but the initial yield is 3.36%… The yield on the US 10-Year Treasury is now 3.83% because prices have fallen more than 1 point in bonds today and the yield is 14 basis-points higher in the US since this morning.

Abd so is Chinese capital, Bank of Chine new share offering:

BEIJING — Bank of China said Thursday it wants to issue more shares in Hong Kong soon, an offering that could strengthen its balance sheet by some $7.7 billion.

Many of China’s big banks are tapping debt and equity markets for funds after a lending spree last year in support of Beijing’s economic stimulus efforts. The surge in lending left their capital ratios under pressure and fanned worries about bad loans.

Bank of China, which is also listed in Shanghai, said the follow-on offer of Hong Kong-listed shares would be 20 percent of its Hong Kong share capital.

Emerging market Bond offering on the rise:

London. Companies and governments in the developing world are on track to sell bonds in excess of $60 billion in the first quarter of 2010 as the global economy recovers from its deepest recession since World War II.

Figures compiled by investment bank ING show both companies and governments in the developing world have already sold nearly $55 billion in bonds this year.

Nearly double last year’s depressed levels, this remains some way off 2007’s record first quarter when corporate and sovereign borrowers in emerging markets issued more than $63 billion.

“Although there have admittedly been a few intermittent weeks of pause during the recent uncertainties over Greece, the primary markets for emerging-market bonds have improved dramatically over the first quarters of 2009 and 2008,” said David Spegel, head of emerging markets strategy at ING.

“Investors’ tolerance for liquidity and credit risk has improved markedly,” ING’s Spegel said, noting that 37 percent of the first quarter’s corporate issues were rated below investment grade.

If issuance volumes included resurgent local-currency bond sales, emerging-market borrowers would have raised $102 billion in the year-to-date.

“The return on emerging sovereign dollar debt is not fantastic but in terms of risk-return it’s one of the best,” said Pierre Yves-Bareau, head of emerging debt at JPMorgan Asset Management.

Asian firms take advantage of dollar based bond sales.:

March 10 (Bloomberg) -- The lowest relative borrowing costs in more than two years and demand from international investors is driving Asian companies to sell record amounts of dollar- denominated bonds.

BOC Hong Kong (Holdings) Ltd., the Hong Kong unit of Bank of China Ltd., and Chinese developer Evergrande Real Estate Group Ltd. led Asia-Pacific borrowers selling $38.4 billion of dollar debt this year, the fastest start on record, according to data compiled by Bloomberg. Sales climbed 35 percent from $28.4 billion in the same period last year, when they slumped 22 percent in the aftermath of the seizure in credit markets.

“It’s one of the cheapest times to borrow in U.S. dollars, and at the same time, there’s a lot of cash floating around,” said Rajeev de Mello, head of Asian investment for Western Asset Management Co., which oversees $506 billion. U.S. and European pension funds “want a slice of the action,” De Mello, who is based in Singapore, said in a phone interview.

The extra yield demanded for dollar debt from investment- grade companies in Asia instead of Treasuries has fallen to 2.44 percentage points from 7.62 percentage points in December 2008, according to JPMorgan Chase & Co. Spreads fell close to a two- year low because growth in the region is helping lead the world out of the worst financial crisis since the Great Depression.