Asian bonds rose on Monday after a sharp rally in global equity markets, while the response to a primary debt offering from Chinese firm Nine Dragons was closely watched as a guage of risk appetite.
The iTRAXX Asia ex-Japan high-yield index, a key measure of risk aversion, tightened to around 482/492 basis points (bps) from Friday's close of 528/531 bps. The high grade index moved in to 101/104 bps from 119/122 bps.
"Just look at the dollar yen, the US equities - there is a feel of real money buying," said a Singapore-based trader referring to Wall Street's rally on Friday and the dollar's gains against the Japanese yen.
A $300 million bond offering by Nine Dragons Paper (Holdings) Ltd, China's largest paper board producer, is the latest deal to provide evidence of investor appetite for emerging market assets.
Bankers predict more Asian issuers will sell debt in beleaguered dollar-bond markets after two bond issuers raised $700 million earlier this month, suggesting some stability may be returning to markets. Offshore bond issued from Asia ex-Japan raised US $6.3 billion in the first quarter this year, a 53 percent decline from a year earlier, according to Thomson Financial.
"The new issue market is significantly improved following the rally in Itraxx and global equities," said Sean Henderson, Asia-Pacific head of debt syndicate at HSBC.
Media reports said the Bank of England will announce a $99.8 billion government bond swap to break a lending squeeze while the Bank of Japan is likely to drop its rate hike stance.
Meanwhile, bonds from The Philippines, Asia ex-Japan's biggest offshore bond issuer, were mixed. It 2031 issue was steady at 113.375/113.75 cents to a dollar. But Philippine 5-year CDS - insurance-like contracts that protect against defaults and restructuring - moved in by 10 bps to 178/190 bps. A Manila-based trader said recent optimism was reined in after hopes faded for an aggressive rate cut by the US Federal Reserve later this month.
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