Asian bond spreads narrowed on Thursday as worries eased that other central banks in the region would follow China's lead and tighten liquidity, while Indonesia's recently issued debt remained well supported. The Asia ex-Japan iTraxx investment-grade index was quoted at 88/91 basis points (bps), against 90/94 on Wednesday, a Singapore-based trader said.
The index widened from 20-month lows in the previous session after China said on Tuesday it was raising the required reserves on bank deposits, triggering concerns other Asian central banks could start tightening policy sooner than expected. The Thomson Reuters Index of Asia emerging credit was quoted at 118.96 on a weighted average basis and at 179.45 bps based on simple average.
"Central banks would time the market appropriately. Will central banks rock the boat? I don't think so. This is not their objective," said Clifford Lau, portfolio manager at Pramerica Investment Management in Singapore.
Indonesia's sovereign dollar bonds sold on Tuesday stayed above their issue price. The bonds due in 2020 were quoted at 99.50/99.60 cents on the dollar, up from the issue price of 99.044. The bonds traded as high as 99.625 on Wednesday amid strong demand from US investors, traders said. The bond is yielding around 5.94 percent, down from the 6 percent yield at the time of the offer. Indonesia's five-year credit default swaps (CDS) was steady at 185/195 bps.
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