First Pacific Co Ltd debt fell slightly on its Asian debut on Tuesday as secondary market investors saw the bond's pricing as too tight, while an expected string of new issues also weighed on sentiment. The broad market was steady as investors held off with fresh bets ahead of the announcement of the results of the US Federal Reserve meeting later in the day.
-- Broad market steady ahead of results of Fed meeting
-- China Medical plans debt sales, adding to busy pipeline
The Asia ex-Japan iTraxx investment-grade index series 14 was little changed at 122 basis points (bps), traders said. The series started at 123/125 bps on Monday morning. "Investors prefer to stay on the sidelines when new issues are piling up at the gate. It is also natural for investors not to place too many new bets ahead of the FOMC meeting," said Clifford Lau, who helps manage more than $500 million at portfolio manager at Pramerica Fixed Income.
"The outlook for Asian spreads remain constructive," Singapore-based Lau added. "October will likely be a busy month as well for new issues, especially for high yield credit, but the reach-for-yield game will make the high-yield market the better bet for the rest of the year."
The Fed is not expected to announce further easing of policy just yet, but there are expectations that it will reiterate its readiness to act if necessary. First Pacific on Monday sold $400 million in 10-year bonds, $100 million more than planned because of strong demand, allowing the company to price the debt at 6.375 percent, the tight end of its price guidance.
But the bond due in 2020 traded at 99.875 cents on the dollar on Tuesday after it was sold at par, traders said, as expectations of more corporate and sovereign issues made secondary market players reluctant to bid aggressively for the new bond. Medical device maker China Medical Technologies Inc plans to meet investors from this week ahead of a dollar bond sale, a source said on Tuesday. Hong Kong billionaire Li Ka-Shing's Cheung Kong Infrastructure Holdings (CKI) is also expected to price its planned perpetual bond this week, traders said.
Philippine sovereign bonds were steady, after rising late on Monday when the government announced a plan to swap $3 billion of existing bonds into new, higher-yielding ones, Manila traders said. They said that the initial excitement died quickly given expectations of more supply, including an issue at least $500 million in new Philippine government bonds due in 2021.
Bonds due in 2020 traded at 118.125/118.875 cents on the dollar after they have risen as much as half a point after the debt swap announcement, local traders said. Analysts were optimistic, however, that the primary market should easily absorb new debt supply. "There has been no signs of indigestion," said Brayan Lai, credit analyst at Credit Agricole CIB in Hong Kong. "Investors are reaching for duration and seeking yields."
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