Asian bond spreads tightened for a third straight day on Friday, after Google became the latest US blue chip to post better-than-expected earnings, easing worries about the impact of a slowing US economy on the global corporate sector.
Credit spreads have rallied this week as US financials such as J.P. Morgan Chase reported results that were not as bad as expected, while earnings of US blue chips such as IBM also topped forecasts. The iTRAXX Asia ex-Japan high-yield index, a key measure of risk aversion, tightened to around 520/526 basis points (bps) according to a trader, down some 15 bps from Thursday's levels and down about 50-60 basis points for the week.
The investment-grade iTRAXX index tightened by some 6-8 basis points to 117 from the previous session, the trader said. "Equity benchmarks took a breather, but market psychology remained buoyant from upside surprises in tech-related earnings, notably from Google (which) beat the Street, and the it-coulda-been-worse quarter for Merrill," Brett Williams, a credit analyst at BNP Paribas, told clients in a note.
Philippine sovereign debt also firmed, with five-year credit default swaps, or insurance-like contracts that protect against defaults, traded at 200 bps, about 10 bps tighter, according to a Manila-based dealer.
Hopes that more Asian issuers will sell bonds in beleaguered dollar-bond markets were revived this week after power generator Korea Southern Power Corp sold $300 million in five-year bonds on April 11, followed by a $400 million sale of 10-year bonds by unit of Hong-Kong based Swire Pacific on Monday.
Chinese containerboard maker Nine Dragons Paper Holdings is among the companies mooted to be looking to tap global debt markets after it completed a global road-show in Los Angeles on Wednesday. But Asian issuers continue to look for alternative markets, with Export-Import Bank of Korea (KEXIM) on Thursday selling 250 million Swiss Francs ($248.8 million) in three-year notes and 100 million francs in two-year notes.
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