Asian bond spreads flat

Asian credit spreads were range-bound in quiet trade on Friday, with renewed worries about the US economy and the health of the global financial sector offset by gains in the region's equity markets. The iTRAXX Asia ex-Japan high-yield index - a key measure of risk aversion - traded at around 610 basis points (bps), little changed from Thursday's levels, a Hong Kong-based trader said.
"Sentiment remains weak overall, but we are having a quiet session with not a lot of trades happening," the dealer said. Asian credit markets have had a volatile week, with spreads narrowing on Tuesday after J.P. Morgan raised its offer for stricken US investment bank Bear Stearns, which increased the likelihood that the deal would be sealed.
That helped reduce the uncertainty about who would back Bear Stearns' commitments in credit markets, but sentiment soured soon after following a steady stream of weak US economic indicators, which have reinforced fears of a recession in the United States.Philippine bonds - among the most widely traded in the region - were little changed from Thursday, with bonds due in 2032 at 96.875/97.25 to the dollar and bonds due in 2031 at 111.5/112, according to a Manila-based trader. The country's five-year credit default swaps (CDS) - insurance-like contracts that protect against default - were also steady at 237/242 basis points.
The uncertainty in global markets is creating a big backlog of Asian names who want to sell offshore bonds but are unwilling to pay the premiums demanded by investors, according to bankers in the region.
"There are a lot of issuers looking to come into the market. The pipeline is huge, but it's a question of whether they'll end up coming in or not," said a Hong Kong-based syndicate banker at a US investment bank. The volume of G3 currency bond issues - or bonds denominated in US dollars, euros and yen - dropped 48.1 percent to $6.3 billion in the first quarter from the same period a year earlier, according to Thomson Financial data.
Given the weak global market conditions, issuers are increasingly looking at raising money in their local markets. Asian currency bond issuance rose 9.9 percent to $26.9 billion in the same period, Thomson said. Industrial Bank of Korea plans to sell 400 million ringgit ($125 million) of five-year bonds in Malaysia as early as next week, two sources with direct knowledge of the deal told Reuters on Friday.