Asian bonds were broadly firm on Tuesday after US cable operator Time Warner Cable Inc made the biggest high-grade debt sale in a month, but investors were cautious due to the growing pipeline of new issues in the region. Indonesian and Philippine bonds were weak after Jakarta launched a $1.5 billion, three-part debt offer that will reopen an existing series of dollar-denominated bonds.
But the general market was trading tighter after Time Warner raised $5 billion in a three-tranche transaction, the largest US high-grade sale since cigarette maker Philip Morris International sold about $6 billion of debt on May 13. "It shows investor appetite is still there for good-quality debt. The market is feeling better in general," said a Hong Kong-based trader.
The iTRAXX Asia ex-Japan high-yield index, a key measure of risk aversion, narrowed by about 10 basis points (bps) to 487/493 bps, while the investment-grade index moved in by 4 bps to 122/127 bps. But investors are watchful ahead of earnings announcements this week from US financial firms Goldman Sachs and Morgan Stanley, as there could still be more write-offs in that sector.
And a slew of new Asian debt offerings is also keeping a lid on gains as secondary market prices adjust for discounts in the selling prices of the new debt. Besides Indonesia, a host of corporate issuers are scheduled to enter the market.
South Korean retailer Shinsegae Co, Indian mining group Vedanta Resources and Trade and Development Bank of Mongolia are currently looking to launch dollar bonds. GS Caltex Corp, South Korea's second-biggest oil refiner, will meet global investors to market a dollar bond in presentations beginning on Thursday. GS Caltex's five-year credit default swaps - insurance-like contracts that protect against defaults and restructuring - widened by 4-5 bps to 155/170 bps.
Indonesia, which is reopening bonds maturing in 2014, in 2018 and in 2038, may be selling the new debt at a discount of 1-1.5 points to the market price, one fund manager said. "With the Indonesian deal, traders are watching out for the price at which the new issue comes out. If they give a generous yield, it will make ROPs quite expensive," said a Manila-based trader, referring to Philippine bonds.
The Philippines and Indonesia are viewed as peers by debt markets due to identical risk profiles. Both South East Asian countries are rated BB-minus, three notches below investment grade, by Standard & Poor's Ratings Services. Manila bonds due in 2031 were quoted at 109/109.50 cents to a dollar while bonds due in 2032 were at 95/95.50, both down by an eighth to a quarter point compared with New York levels.
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