Asian bond spreads narrowed to their lowest in three weeks on Tuesday as gains in equities markets encouraged investors to pile into riskier assets, while others covered short positions after a recent selloff. The Asia ex-Japan iTraxx investment-grade index narrowed by 9 bps to 103/110 basis points, a Singapore-based trader said.
It was the tightest level since October 20's 99/102 bps. The index widened by about 10 bps last week as investors became wary of new issues in the region. "This is mainly a reaction to what happened to the stock market in the US overnight," the trader from Singapore said. "The market is on a bullish track after some consolidation in the previous week."
Recently sold bonds from Indonesian coal miner Bumi Resources and Chinese developer Agile Property extended gains. Bumi's 7-year debt was quoted at 102.125/102.625 cents on the dollar, up from 100.25/100.50 on Monday, traders said. Agile's 7-year bond traded at 100.625/101.125 cents on the dollar, higher than Monday's 98.75/99.5. "Some dealers are short covering and there is an awful lot of real money demand," a trader from Hong Kong said.
Asian shares rose on Tuesday, after US stocks hit a 13-month high on Monday, spurred by a G20 finance ministers' pledge to keep emergency measures in place until the global economic recovery was assured. Philippine bonds gained for a third day, with the country's debt due in 2034 traded at 98.50/99.00 cents on the dollar, up from 97.50/98.50 on Monday, a Manila-based trader said.
The country's 5-year credit default swaps (CDS) narrowed 3bps to 170/180. Issues of bonds denominated in dollars, euros and yen have raised about $8.5 billion in October, compared with $47 billion raised in the first nine months of the year, averaging a shade over $5 billion each month.
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