Asian bond spreads at one-week low

Asian debt spreads tightened to their lowest in a week on Wednesday as extended gains in equities encouraged investors to add more bonds such as those from South Korea's Woori Bank to their portfolios. The broad Asia ex-Japan iTraxx investment-grade index narrowed 3 basis points (bps) to 124/126, traders said, the lowest since July 14. Sovereign credit default swaps (CDS) also tightened.
Asian shares rose for a second day, spurred by gains on Wall Street and strong earnings from Apple Inc. The MSCI index of stocks in Asia-Pacific outside Japan was up 0.4 percent as of 0447 GMT. "Obviously, everything is tied over to overnight movements in US equities, which have a slightly better tone. Overall positive sentiment is driving spreads tighter," said Vijay Chander, head of credit strategy at Standard Chartered Bank in Hong Kong.
Traders said bonds from South Korean names such as Woori Bank and the recently issued First Pacific Co were actively traded in the morning session. Bonds from Woori Bank, a unit of Woori Finance Holdings Co Ltd, due in 5-1/2 years were traded 6 bps tighter at 208 bps over US Treasuries. Bonds from First Pacific, sold last Friday, extended gains and were traded half a point higher at 103.25/103.50 cents on the dollar, as its higher yield relative to Philippine government debt lured investors, traders from Manila said.
First Pacific's debt offered a yield pickup of up to 300 bps over comparable Philippine sovereign dollar bonds, traders said. First Pacific owns the Philippine's largest listed company, telecommunications giant Philippine Long Distance Co, making its debt more attractive to local investors.
Tightening credit spreads may prompt more Asian issuance in the coming sessions, traders said. State Bank of India was expected to sell bonds after its roadshow ends in New York later in the day, traders said. Another Indian lender, state-run IDBI Bank may also sell dollar bonds, traders said. The lender had picked banks to help arrange a series of meetings with investors this month, market sources said.
In the sovereign space, credit default swaps (CDS) also narrowed. The iTraxx SovX Asia Pacific index, which tracks the five-year sovereign CDS of 10 countries in the region, tightened 3 bps to 120/122, traders said. Meanwhile, Titan Petrochemicals Group said investors tendered around $209.5 million of bonds, representing 66.43 percent of total debt outstanding, by swapping with new convertible notes and cash settlement.