Asian debt spreads widen

Asian bond spreads widened on Friday as economic worries prompted investors to dump risky assets but an expected slowdown in the flow of new issues ahead of the year-end restricted losses. Issues from India's ICICI Bank and Philippine state agency PSALM are widely considered to be among the last debt offerings this year, mid-way through what is expected to finish as one of the busiest quarters this year.
The Asia ex-Japan iTraxx investment-grade index moved out to 110/113 basis points (bps) from Thursday's 105/109 bps as investors turned jittery after data showed the recovery in the US housing market would be tepid. But the response to the bond offer from ICICI has been quite strong as investors snap up bonds from the second biggest lender in India, one of the world's fastest growing major economies.
A market source said the bank is seen raising up to $750 million via dollar bonds due in March 2015 and that orders have exceeded $3 billion so far. ICICI has indicated a price guidance of about 350 basis points over US Treasuries and the deal is likely to be priced during New York trading hours later on Friday.
Its existing bonds due in 2012 were quoted at 104.5 cents on the dollar, marginally higher while its 5-year credit default swaps were slightly wider at 200/220 bps, in line with the broad market. PSALM, is selling bonds due in 2024 in an issue of up to $600 million and reopened its 2019 dollar bonds as part of its first debt exchange programme.
The bonds are to be sold at a spread of 90-115 bps over yields on Philippine sovereign bonds of similar maturity. The existing 2019 bonds were quoted at 105.50/106.25, compared with the exchange price of 105.25, a Manila-based trader said.
Including these two issues and mid-way through the last quarter of the year, issues of bonds denominated in dollars, euros and yen from Asia ex-Japan borrowers would have raised over $14 billion. This compares with the $47 billion raised in the first nine months of the year, averaging close to $16 billion each quarter.
Bonds from Philippines, Asia's most active sovereign bond issuer, also weakened in line with the broad market. Philippines' 6.375 percent bonds due in 2034 traded at 98.125/98.625 cents on the dollar, lower by a quarter to half a point. Its credit default swaps were steady at 175/180 basis points. Manila is expected to launch yen and dollar bonds as early as January as the government needs to raise about $2 billion to cover its foreign debt requirements for 2010.