Asian bond spreads narrow

Asian bond spreads tightened on Thursday after tamer-than-expected US inflation data was seen giving the Federal Reserve some breathing room to deal with a slowdown in the world's largest economy. The iTRAXX Asia ex-Japan high-yield index, a key measure of risk aversion, narrowed by around 10 basis points (bps) to 450 basis points (bps), according to dealers.
"The US consumer price index increased less than anticipated, which added to expectations of the Fed steering a neutral policy path," said Brett Williams, a credit analyst at BNP Paribas.
The iTRAXX high-yield index has tightened significantly after hitting a record above 650 hit in mid-March, though at the current levels it's still roughly double the levels in October 2007 before fears of a global credit crunch hit debt intensified. The index compiled by the Markit Group rolled over to a new series in March.
Philippines' credit default swaps (CDS), which had widened recently on the country's plans to borrow more abroad this year, narrowed by several basis points to 207/215, according to a Manila-based dealer, though trading was subdued.
Indonesia's CDS were last quoted at 233 basis points, according to a dealer, narrowing the difference in spreads between the two countries to around 28 basis points, down from as much as 30-40 bps.
The sovereign debts of the two countries usually have a high degree of correlation given their similar risk profiles, but Indonesia's debt had underperformed due to concerns about the impact of surging oil prices on hefty subsidies provided by the Jakarta government.
Indonesia said on Wednesday it planned to raise fuel prices by a maximum 30 percent in an effort to help the 2008 budget. An earlier government announcement it would raise prices had already sparked protests in several parts of the country.
Indonesia also plans a $1.5 billion sovereign bond sale in June, after already raising $2 billion in 10-year and 30-year bonds in January. That would be far more than the potential $500 million the Philippines could raise from overseas markets this year, after the country already borrowed $500 million in January.
Meanwhile, Indonesia's PT Truba Alam Manunggal Engineering Tbk is still looking to price a $100-150 million in three-year senior unsecured bonds at an indicated yield of 17 to 18 percent, in what would be the first global high yield debt issuance from Asia this year.