Asian bond spreads narrow

Asian bond spreads tightened slightly on Wednesday after Wall Street's impressive finish showed renewed appetite for riskier assets, but Chinese issues underperformed after Beijing's latest move to rein in bank lending. The Asia ex-Japan iTraxx investment-grade index narrowed 2 basis points (bps) from Friday's close to 113/115, traders said.
But volume of trade was thin as most Asian investors were still on an extended Lunar New Year break, traders said. The index has eased from five-month highs last week as risk appetite improved after upbeat New York State factory data and as the European Union pressed Greece to implement more measures to narrow its budget deficit, traders said.
The Thomson Reuters Index of Asia emerging credit was quoted at 209.73 on a simple average basis and at 146.20 on a weighted average, the tightest in almost two weeks. "The market seems to be in a risk-on, risk-off mode," said Tim Jagger, Asia-Pacific head of credit strategy at Royal Bank of Scotland in Singapore.
"At the moment, this is a risk-on phase again. We had pretty decent markets overnight and that's probably set the tone in Asia today. We also have some relatively supportive news on Greece over the last few days." Hong Kong and Singapore financial markets were closed on Monday and Tuesday for the Chinese New Year holiday.
Ten-year bonds from the Philippines, one of Asia's most active global debt issuers, were traded a quarter point higher at 105.75/106.125 cents on the dollar, Manila-based traders said. The country's 5-year credit default swaps were trading 5 bps tighter at 199/204. But bonds sold last month by Evergrande Real Estate Group due in 2015 fell to 97.75 cents on the dollar from 98 on Friday, as China's surprise move on Friday to raise banks' reserve requirements spooked investors, traders said.
Bank of China's 2020 bonds also traded -7 bps wider against US Treasuries at 214/216, traders said. Indian bonds were also weaker, with Export and Import Bank of India's debt due in 2015 traded at 244/249 bps over US Treasuries, 5 bps wider from Friday, as talk about more dollar bond sales from the country weighed on sentiment. India's Bharti Airtel may issue bonds to help fund its acquisition of Kuwaiti telecom Zain's African assets. Indian state lenders Bank of India and Bank of Baroda may also resume dollar bond sales plans once market conditions stabilise further, traders said.