Asian debt spreads widen

Asian credit spreads widened on Friday, hit by growing signs of sovereign debt problems in the euro zone and poor US jobs data that hurt demand for risky assets. The volatile market conditions forced India's state-run lender Bank of Baroda to postpone its five-year dollar bond offering while newly sold bonds were quoted wider across the board with the prospects of a more issuance also weighing.
"Markets are waking up to equities' substantial decline in Europe and North America and also knowing that a healthy deal pipeline is to come," said an analyst at Hong Kong-based agency broker Bermian & Co. The Asia ex-Japan iTraxx investment-grade index widened 11 basis points (bps) to 127/131 bps.
The Thomson Reuters Index of Asia emerging credit was quoted at 203.71 on a simple average basis and at 141.78 on a weighted average. Overnight BOC Hong Kong, a unit of state giant Bank of China, sold 10-year, dollar-denominated bonds at a spread of 200 bps over US Treasuries.
The $1.6 billion offering received orders of $4.5 billion from more than 310 accounts, which allowed the issue size to be upsized from the earlier target of $1-1.5 billion. Asian investors took 57 percent, European buyers took 21 percent while the rest went to United States. By investor type funds took 45 percent, private banks 30 percent, banks 9 percent and other investors took 16 percent. Hong Kong's Dah Sing Bank priced a $225 million 10-year lower-tier II bond at 294.2 bps over Treasuries. The deal received more than $1.5 billion in offers from 117 accounts. Asia took 95 percent with the rest going to Europe.
By investor type funds took half the allotments, private banks accounted for 30 percent, other banks 18 percent and insurance companies and pension funds 2 percent. But both these tier II bonds weakened in the after market as investors worried that growing euro zone troubles could impede or even derail the global economic recovery.
Bank of China bonds were trading at 217 bps over while Dah Sing bonds were quoted at 301/294 bps above. Also on Thursday, Singapore-listed Noble Group raised $400 million bonds through the reopening of its existing 2020 bonds. These bonds were sold at a yield of 6.285 percent, compared to the 6.875 percent pricing for the same bond in October last year.
Supply indigestion is also playing on investors' minds after Kraft Foods Inc on Thursday sold bonds at wider spreads than what was initially projected. Asia ex-Japan absorbed a hefty $7.25 billion of debt from issues of dollar-, euro- and yen-denominated bonds in January. This follows last year's aggregate of $64.7 billion, a record high.