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EM ASIA DEBT-Philippines slips on budget, Korea Hydro weak

Published: 10 Jun 2009 21:32:43 PST

HONG KONG, June 11 - Philippines sovereign bonds slipped further on Thursday after the government said its 2009 budget deficit would be a record gap, while newly issued bonds from Korea Hydro and Nuclear Power fell.

Otherwise, Asian bonds were largely steady as many dealers kept to the sidelines ahead of U.S. retail sales figures later in the day.

Newly-issued dollar-denominated bonds from Korea Hydro lost ground in their first Asian day of trading in the secondary market amid talk the debt had been priced too aggressively.

The state-owned firm sold $1 billion in five-year bonds at 362.5 basis points (bps) over U.S. Treasuries, at the tight end of its guidance.

The deal had attracted $8 billion in orders though, raising expectations the bonds would find healthy demand in the secondary market.

"Most investors who bought the bond in anticipation that prices would go up because of the huge demand are now getting out as they realise there is not much money to be made," a Singapore-based credit analyst said.

The bonds last traded at 375 bps over U.S. Treasuries, well over their issue price. They had widened earlier to as much as 383 bps over, traders said.

In the broader market, the Asia iTraxx investment-grade index excluding Japan was little changed at 167/175 bps, as investors kept to the sidelines ahead of U.S. retail sales data later on Thursday, traders said.

The U.S. data, due at 1230 GMT, is expected to show the first rise in retail sales in three months.

Following are the major movers on Thursday in Asia in cash bonds and credit default swaps (CDS):

-- PHILIPPINES' cash bonds fell for a third day as investors fretted over how the government would bridge its budget deficit, which it said on Wednesday would be a record of 250 billion pesos, or 3.2 percent of GDP.

The government also raised its borrowing needs for 2009 by just over $1 billion, although any overseas borrowings would mostly be met through concessional loans.

The country's 8.375 percent bond due in 2019 fell to 115.00/115.25 from 116.00/116.50 on Wednesday.

Philippines five-year CDS widened to 210/220 bps from 205/210, traders said.

"The question now is, how much they are going to raise from the overseas market and when they will do it," a trader said.

-- SOUTH KOREA's five-year CDS was flat at 155/170, but may widen in coming sessions as the market expects more debt issues from South Korea, traders said.

Potential issuers include Korea National Oil Corp, which recently hired six banks for a possible dollar bond sale. FIVE-YEAR CREDIT DEFAULT SWAPS

Bid/Ask spread

Current Week ago Korea Dev Bank 158.94* 179.21* Hutchison 120/140 120/140 PCCW-HKT 140.00* 165.00* China 67/77 65/~ Indonesia 290/310 ~/345 Korea 155/~ 130/145 Malaysia 101/~ 90/110 Philippines 205/~ 175/~ ~ no bid or ask *midspread ASIAN BENCHMARK DOLLAR BONDS

Coupon Maturity Bid price Bid spread

5-YEAR

------

DBS Bank 7.13 15-May-11 104.99 149

Malaysia 7.50 15-Jul-11 109.68 --

ICICI Bank 5.75 12-Jan-12 97.75 380

Petronas 7.00 22-May-12 110.34 39

Hutchison 6.50 13-Feb-13 104.97 209

Chartered Semi 6.25 4-Apr-13 89.85 657

Korea 4.25 1-Jun-13 96.60 230

United Overseas 4.50 2-Jul-13 99.00 187

PCCW-HKT 6.00 15-Jul-13 90.80 577