Asian bond spreads narrowed to their lowest in nearly four months on Wednesday, with investors emboldened by the plan of US President-elect Barack Obama to spur the economy through lower taxes and more spending.
The Philippines, one of Asia's most active debt issuers in the offshore market, is in focus as the government launched a 10-year dollar bond offer that is expected to raise $1 billion. The bonds could be priced as early as during New York time on Wednesday.
The Asia iTRAXX investment-grade index excluding Japan, a key measure of risk aversion, narrowed to 280 basis points, a level not seen since early October, a Hong Kong-based trader said. The index has tightened from 305 basis points on Tuesday. The equivalent high-yield index also narrowed to 1,050-1,200 basis points from 1,125-1,300 on Tuesday. "It's the new year and more investors are keen to put money to work," a trader said.
"The mood is pretty bullish right now." US President-elect Barack Obama is seeking quick action on a package of measures including tax cuts and more spending worth $775 billion. The Philippines' five-year credit default swaps (CDS) - or insurance-like contracts that protect investors against defaults or restructuring - narrowed to 320 basis points from 360 even with the planned debt sales.
The yields on the Philippines' 10-year bonds were steady. The bonds, with a coupon rate of 9.875 percent and due in 2019, yielded 8.4 percent, a trader said. Manila hopes to cover much of its $1.5 billion total 2009 overseas borrowing needs in the first quarter, National Treasurer Tan Roberto said.
The Philippines is the first country in Asia to offer sovereign bonds overseas and followed Colombia and Brazil, which each issued $1 billion of 10-year bonds on Tuesday. Indonesia's five-year CDS were range-bound at 575-625 basis points. Indonesia this week said it planned to spend $6.6 billion on infrastructure that is expected to lift growth at Southeast Asia's biggest economy by 1.5 percentage points in 2009.