By Fiona Law

March 26, 2013 5:33 a.m. ET

HONG KONG—A Chinese property developer is selling so-called perpetual bonds, the latest sign that the market for one of the riskiest types of debt in Asia is warming up again after a sudden selloff earlier this year.

Perpetual bonds are corporate bonds that offer relatively high yields but are especially risky because they would be among the last bonds to be paid off if a company ran into trouble.

In January, four Asian companies—including India’s Reliance Industries and Hong Kong’s Cheung Kong Holdings —sold a combined US$2.5 billion of perpetual bonds, capitalizing on strong demand for higher returns in the region.

But investors began dumping the bonds almost immediately, partly due to an uptick in yields on 10-year U.S. Treasurys, in some cases sending the prices of the perpetual bonds down 10% and effectively wiping out two years’ yield.

Some have since rebounded to tread above water, but the selloff was seen as a red flag for the broader Asian bond market.

The perpetual bond market in Asia had been effectively frozen since. The exception occurred March 6, when Philippine oil refiner Petron Corp. sold a US$250 million perpetual bond, after tapping the market for US$500 million in January.

Now Beijing Capital Land Ltd. a medium-size, state-owned property developer, is seeking to sell a US$300 million U.S. dollar perpetual bond.

The company, with ratings of Ba2 and double B-plus by Moody’s Investors Service and Fitch Ratings, respectively, had initially planned to set an interest rate of 8.5%-9%, a term sheet seen Tuesday by The Wall Street Journal showed. But in its final guidance late Tuesday, it lowered the rate to 8.375%-8.5% due to strong demand, another term sheet showed.

The proposed bond, which would be issued by Beijing Capital Land’s unit, Central Plaza Development Ltd. is unrated. Nevertheless, it carries features that some analysts think would be favorable to investors.

Under the terms of the bond, the issuer can redeem it as early as the fifth year after issuance, at which time its interest rate would rise by 500 basis points, or 5%. It will also reset its coupon every five years.

[The rate increase] significantly reduced the extension risk of the proposed senior perpetual [bonds] of Beijing Capital Land, Citigroup analyst Jenny Zeng said in a note to clients. In other words, that gives investors confidence that the issuer will likely redeem the bond after several years.

Credit Suisse and HSBC are arranging the sale, the term sheet said.