Asian bond spreads widen slightly

Asian bond spreads widened slightly on Thursday, tracking weakness in the region's equities markets, while expected new corporate issues from Indonesia and India kept some investors on the sidelines. The Asia ex-Japan iTraxx investment-grade index widened 2 basis points (bps) to 115/117, traders said, but volume of trade remained anaemic as most investors were still out for the Chinese New Year holiday.
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. Concerns that Greece's fiscal woes were far from over also weighed on sentiment, traders said. Germany and other northern European countries were against any bailout for debt-stricken Greece.
"The market has been shrugging off the idea that the worst scenario may happen in Greece and Europe," a trader said. "But the market now realises that the process of fiscal adjustment in Greece will be a tough one. Looking forward, spreads will be volatile and bonds will continue to be under pressure." The MSCI index of Asia Pacific stocks outside Japan were down 0.50 percent as of 0503 GMT. Sovereign issues were mostly lower, with the 10-year bonds from the Philippines, one of Asia's most frequent sellers of dollar debt, traded at 105.75/105.875 from as high as 106.125 in the previous session, Manila-based traders said.
Expected new supply from India's Bharti Airtel, Bank of India and Bank of Baroda, as well as Indonesia's PT Indosat pushed recent issues lower. The market was also rife with talk about new issues from South Korea's Hyundai Card and Woori Bank, India's Essar Steel and the governments of Mongolia and Sri Lanka.
"In the new issue space, the main candidates that we are likely to see are some Korean quasi-sovereign corporates tapping the market, Indian banks as well as Indonesian banks, which we haven't seen for awhile," said Rajeev De Mello, head of Asian investment at Western Asset in Singapore.
Export and Import Bank of India's bonds due in 2015, sold in January, traded 2 bps wider at 245/250 bps over US Treasuries, traders said. Asian governments and companies were in a rush to tap the global bond market ahead of an expected rise in borrowing costs as central banks look to start raising rates in the second half of the year.