Asian bond spreads remain wide

Asian bond spreads extended their widening trend for a fourth day on Thursday after disappointing US jobs data, while newly issued debt from Chinese property developer Country Garden gained. "The market is still in risk aversion mode. The bias is for the flight to safety to continue," one trader said. "The market is still generally cautious about the global development, especially on the US job market."
The Asia ex-Japan iTraxx investment-grade index widened by 3 basis points to 146/148, traders said. Country Garden sold $300 million of 5-year senior notes on Wednesday, with a coupon rate of 11.75 percent, the lower-end of its target range. The bond was trading at 100.50/100.75 cents on the dollar on Thursday, up from its issue price of 100, traders said. The spread has narrowed by 10 basis points (bps) from 942.2 when the debt was sold.
The sale attracted $800 million worth of orders, a market source said. Of the total bonds sold, 65 percent went to buyers in Asia, 17 percent to US investors and 18 percent to Europe, the Middle East and Africa, the source said. By investor type, 48 percent of the purchases came from asset managers and hedge funds, 25 percent from retail investors, 13 percent from banks and the rest from others, the source added. "Country Garden has a good story to tell. They focus mainly on the large, critical mass of the middle to slightly upper middle segment of the consumer market," said Nancy Koh, head of Asian corporate research at BCP Securities in Singapore.
Country Garden's sale bodes well for Korea National Housing Corp, which is expected to price its benchmark 5-year dollar bonds later in the day, traders said. The ADP Employer Service said on Wednesday that US private employers shed 298,000 jobs in August, more than the 250,000 that economists had expected. The data made Wall Street investors nervous, driving shares lower, ahead of the release of non-farm payrolls figures on Friday.
Indonesia's sovereign bond prices extended their declines, with the 11.625 percent bond due in 2019 trading at 134/135 cents on the dollar from 134.50/135.50 on Wednesday, traders said. The country's five-year credit default swap (CDS) widened by 5 bps to 230/245, traders said. Elsewhere, South Korea's five-year CDS was flat at 140/150 bps, traders said.