Asian sovereign and corporate bond spreads continued to widen on Tuesday as high oil prices reinforced concerns about rising inflation at a time of slowing global economic growth. Investors were also cautious amid expectations credit markets in London and New York would weaken later in the day, when they re-open following public holidays on Monday.
The iTRAXX Asia ex-Japan high-yield index a key measure of risk aversion, widened by around 10 basis points (bps) to 495. "The markets are drifting wider, although there's no special news at all. Most people are expecting a weaker market in Europe and the US," a Hong Kong-based trader said.
Credit spreads in the region widened by about 60-70 basis points in the second half of May, when global markets were pounded by oil prices surging to record highs.
Philippines' credit default swaps, or insurance-like contracts that protect investors against defaults or restructuring, widened by around 5 basis points to 220/225. But Manila's cash bonds, among the most widely traded in the region excluding Japan, were rangebound. Bonds due in 2031 were quoted at 111.5/111.75 cents to the dollar, while 2032 bonds were at 96.5/96.75.
Little reaction was seen after the Philippines' acting national treasurer said on Monday that the country was unlikely to make major revisions to its local and overseas borrowing mix for 2008. The comments from Roberto Tan appeared to signal Manila may not float an additional $500 million in overseas debt this year, though traders have already priced in the possibility of one.
The discussion over a potential Philippine sovereign issuance comes amid a growing pipeline of potential global debt sales from the region, given that Asian bond spreads are still substantially below their peak levels in mid-March.
SP AusNet, an Australian infrastructure firm that is majority-owned by Singapore Power, is going on a non-deal bond roadshow this week, with stops in Hong Kong on Wednesday and Singapore on Friday, a source told Reuters.