Asian bonds opened firmer but gave up some ground on Tuesday as falls in regional stock markets offset some of the initial optimism from data showing the United States could be avoiding a recession.
Investors also wait for a benchmark dollar bond deal from Singaporean commodities trading firm Noble Group this week, as improved tone in credit markets encourages more and more Asian issuers look to sell new debt. Noble's existing bonds due in 2015 were trading at 381 basis points (bps) over mid-swaps on Tuesday.
The iTRAXX Asia ex-Japan high-yield index, a key measure of risk aversion, traded at 415/420 bps, roughly in line with levels in Asian trade on Monday, after initially tightening as much as 5-10 basis points.
The equivalent investment grade index traded at 84, also little changed from the previous session. "We opened a bit tighter given that levels had tightened in New York overnight, but it has started to tail off given the weakness in equities," said a Hong Kong-based trader. The MSCI measure of Asian stocks outside Japan fell 1.2 percent by 0400 GMT.
But Philippine bonds continued to gain on data out on Monday showing a government budget surplus of 25.8 billion pesos ($603.4 million) in April, the highest since 1986 for the month.
Philippine's 2031 bonds traded at 112.375/112.5 cents to a dollar, and 2032 bonds at 97.125/97.375, both higher by a quarter to an eighth of a point. Manila's credit default swaps (CDS) - insurance-like contracts that protect against defaults and restructuring - narrowed by several basis points to 191/197 bps.
The iTRAXX Asian high-yield index, for example, has tightened by more than 200 bps since its record above 650 in mid-March. Noble is scheduled to meet investors in Singapore on Tuesday and in London on Wednesday, while a separate team has been meeting with US investors since this week, via lead managers Citigroup and J.P. Morgan.
Standard & Poor's Ratings Services has rated the proposed new debt BB-plus, or just a notch below the lowest investment-grade level, but Fitch Ratings has an investment-grade BBB-minus rating, making it harder to categorise Noble. Meanwhile, Indonesia's PT Truba Alam Manunggal Engineering Tbk, rated high-yield by both S&P and Fitch, is still looking to price $100-150 million in three-year senior unsecured bonds at a yield of 17 to 18 percent.
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