Asian bond spreads narrowed on Wednesday as upbeat US data lifted investor sentiment on riskier securities, while Indonesian debt extended its gains on government efforts to boost tax revenues. The Asia ex-Japan iTraxx investment-grade index tightened by 5 basis points to 130/137, traders said. The index narrowed for a second day in three to its lowest level since August 11, according to Thomson Reuters data.
"We are seeing some liquidity being put to work. We have better risk appetite across debt markets today," a trader from Manila said. "More signs that the US economy is recovering is fuelling demand for Asian bonds." The recovery from recession in South Korea, Singapore, Taiwan, Hong Kong, Indonesia and Thailand is also helping raise demand for Asian debt, analysts said.
Indonesian sovereign bond prices rose for a second day, after the new tax chief pledged to go after tax evaders to boost revenue collection. The government aims to raise $73 billion in taxes in 2010, up 12 percent from this year's estimate. Indonesia's 11.625 percent bond due in 2019 was trading at 134.50/135.50 cents to a dollar from 134/135 on Tuesday, traders said.
It has gained sharply from its issue price of 99.276 in March 2009. "Generally, the market is pricing in a faster recovery in emerging markets in Asia, including Indonesia," said Enrico Tanuwidjaja, a strategist at OCBC Bank in Singapore. "The positive sentiment on Indonesian bonds is pretty much intact."
South Korea's five-year credit default swap (CDS) narrowed by 6 bps to 128/138, traders said. The Philippines' 8.375 percent debt due in 2019 was steady at 117.00/117.375 cents to a dollar, as the market awaits for details on the country's plan to raise funds by end 2009 for next year's budget, traders said.
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