Home > Community > Financial Markets > EM ASIA DEBT-Spreads narrow on stock gains, U.S. data

EM ASIA DEBT-Spreads narrow on stock gains, U.S. data

Published: 25 Jun 2009 20:20:02 PST

HONG KONG, June 26 - Asian bond spreads narrowed for a third straight session on Friday, spurred by gains in stock markets and news that a contraction in the U.S. economy in the first quarter was less severe than earlier thought.

The Asia iTraxx investment-grade index excluding Japan narrowed by 5 basis points (bps) to 188/193 from Thursday's close, traders said.

For the week, the index, which swelled to its widest gap in a month on June 18 on worries about the U.S. economy, has tightened by up to 9 bps.

Improved risk appetite lifted Asian stocks and bonds following a rally on Wall Street on Thursday, as investors were relieved after Fed Chairman Ben Bernanke emerged unscathed from a grilling by U.S. lawmakers on the Bank of America-Merrill Lynch deal.

Revised data that showed Asia's top export market shrank at a 5.5 percent annualised rate in the first quarter from a previous 5.7 percent estimate further lifted sentiment, traders said.

"The whole Asian market is reacting positively to the rally in U.S. equities, plus the fact that the economy seems to be on the mend," a Hong Kong-based trader said.

"But the upside is limited, because the global economy is not recovering as fast as earlier anticipated."

Unlike safe-haven U.S. or Japanese govenment debt, most Asian bonds are seen as riskier assets that benefit from improved risk appetite.

The MSCI index of Asia Pacific stocks outside Japan was up 1.2 percent as of 0336 GMT.

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

-- PHILIPPINES' cash bonds gained for a third day, with the country's 8.375 percent debt due in 2019 last traded at 115.75, up from 114.50/115.00 on Thursday, as offshore investors cover short positions after a recent selloff, a Manila-based trader said.

Gains were capped on worries about how the government would fund an expected record-high budget gap this year, the Manila trader said.

The government has not firmed up its plans to issue Samurai bonds in Japan or to sell peso retail bonds at home.

"Questions about funding the deficit will continue to haunt the bond market," the trader said.

There were no trades on the nation's five-year CDS, which was last seen at 215/230 bps on Thursday.

-- SOUTH KOREA's five-year CDS narrowed by 3 bps to 180/187 bps, with gains limited by expected new issues from local companies, traders said.

State-run Korea Gas Corp plans to sell about $500 million dollar bonds in the latter-half of the year. FIVE-YEAR CREDIT DEFAULT SWAPS

Bid/Ask spread

Current Week ago Korea Dev Bank 211.38* 204.87* Hutchison 120/140 120/140 PCCW-HKT 160.00* 165.00* China 70/90 87/~ Indonesia 325/~ 290/~ Korea 182/187 195/202 Malaysia 100/130 ~/125 Philippines 205/235 230/250 ~ no bid or ask For CDS prices double click on *midspread

ASIAN BENCHMARK DOLLAR BONDS

Coupon Maturity Bid price Bid spread

5-YEAR

DBS Bank 7.13 15-May-11 105.79 130

Malaysia 7.50 15-Jul-11 109.64 15

ICICI Bank 5.75 12-Jan-12 97.38 427

Petronas 7.00 22-May-12 110.69 51

Hutchison 6.50 13-Feb-13 106.70 187

Chartered Semi 6.25 4-Apr-13 90.42 670

Korea 4.25 1-Jun-13 97.52 234

United Overseas 4.50 2-Jul-13 99.00 216

PCCW-HKT 6.00 15-Jvul-13 95.86 458