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Philippine bonds dipped after Manila announced a new debt offering on Tuesday, but the broad Asian market firmed following a rebound in the region's stock markets.
However, investors remained cautious ahead of the US Federal Reserve meeting on January 29-30, where it is expected to follow last week's 75 basis point emergency cut in its benchmark interest rate with a further half a point cut.
Prices on dollar bonds from Manila fell and the cost of insuring its sovereign debt rose as Roberto Tan, acting national treasurer confirmed a Reuters report of a $500 million offer via a reopening of 2032 bonds. "The market has tried to sell the bond down, they did not expect it to come to the market so soon," said a trader about the bond issue which is expected to be priced later on Tuesday.
The bonds which are to be re-issued, due in 2032, fell to as low as 98.375 cents to a dollar from 99 after Manila confirmed it was borrowing in the international market. Its 2031 bonds fell but only an eight of a point to 112.625/112.875.
The Philippines' five-year credit default swaps (CDS) - insurance-like contracts that protect against default or restructuring - moved out to 215 basis points (bps) from the overnight 210 bps.
But some analysts said the offering was well timed and it would be a successful debt sale. "After Indonesia sold $2 billion, this $500 million bond will be easily absorbed by the market," said Mark Lo, credit analyst with BNP Paribas. Earlier this month, Jakarta raised money through a two-part debt sale of 10-year and 30-year bonds, both tranches of equal amounts.
Both Indonesia and The Philippines are rated BB-minus by Standard & Poor's. The Indonesian bonds due in 2038 were trading steady at 105/105.50 cents to a dollar.
"The timing is also good coming as it has after Moody's reviewed the outlook, although it is a catch-up move," said Lo. The wide iTRAXX Asia ex-Japan high-yield index - an important indicator of risk aversion - tightened by 5 bps to 470/475 bps. But 5-year CDS on ports-to-telecoms conglomerate Hutchison Whampoa Ltd moved in by 8 bps to 97 bps.

Copyright Reuters, 2008

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