Asian bond spreads widen

Asian bond spreads widened on Friday as investors shed riskier assets following disappointing US economic data, while recent issues such as PTT Exploration and Production (PTTEP) fell on profit taking. The Asia ex-Japan iTraxx investment-grade index widened for a second day and may end the week flat after tightening by 11 basis points the previous week.
The index was traded at 125/129 basis points, 2 basis points wider compared with the previous day's close, traders said. The rate of growth in the factory sector slowed sharply in July and US wholesale prices fell for a third straight month, adding to evidence that the US economic recovery is losing steam.
"This is driven more by US data than anything else. The concern is, if the US is not recovering as fast as earlier expected, then there might be a need to revise down economic forecasts and valuations," a trader in Singapore said. PTTEP's bond due in 2015 was traded 5 bps wider over US Treasuries, traders said. The debt was sold on Wednesday at 230 bps above US Treasuries and debuted at 225 in Asia on Thursday.
Bank of East Asia's bond due in 2020, sold on July 11, also widened by 10 bps above US Treasuries to 307, as the Hong Kong lender plans to issue between $100 million to $150 million more of the bond, traders said. After a busy week last week, which saw five new issues such as Bank of East Asia with a total of $2.3 billion sales, this week there were only two sellers including PTTEP that raised a total of $1.1 billion.
But the pipeline remained busy with more companies announcing debt sales plan after meeting investors. Traders said E-Land Fashion China may issue $200 million of 3-year bonds and First Pacific may sell $300 million of 7-year debt. While bankers said State Bank of India may issue bonds after completing a roadshow next week.
First Pacific is on the last leg of a four-day roadshow that kicked off in Manila on Tuesday and will end today in Hong Kong. But the market could absorb these new issues, given the continued inflow of funds into the region, traders said. An ING Bank note said emerging market bond funds' asset under management or AUM rose by 1.87 billion for the week ending July 15, with new investor inflow amounting to $745 million. In the sovereign space, credit default swaps (CDS) were also wider. The iTraxx SovX Asia Pacific index, which tracks the five-year sovereign CDS of 10 countries in the region, was 4 bps wider at 123, traders said.