Asian bond spreads narrowed on Tuesday as a rally in US stocks overnight lifted risk appetite, but gains were capped ahead of a series of new issues. Wall Street shares gained after US home improvement retailer Lowe's posted better-than-forecast results that sparked hopes the recession is easing in Asia's top export destination.
Philippine state agency PSALM, which manages debt and assets of government-owned National Power Corp, is expected to price later on Tuesday benchmark size bonds due in 10 years. The Asia Itraxx investment-grade index excluding Japan narrowed to 205/215 basis points from 230/245 on Monday, a Hong Kong-based trader said.
The MSCI index of Asia-Pacific stocks outside Japan was up 2.6 percent as of 0327 GMT. The following were the major movers in cash bonds and credit default swaps (CDS): Philippines' cash bonds rebounded, with the 8.375 percent bond due in 2019 rising to 115.50/115.875 after falling to as low as 115.00 in the previous session, a Manila-based trader said.
Finance Secretary Margarito Teves said on Monday the government was maintaining its 2009 budget deficit target for now, despite posting its smallest April surplus in four years last month. The market expects the government to turn to multilateral lenders such as the World Bank to fund its deficit. Finance Secretary Teves has said Manila intends to first tap cheap loans from such organisations before looking to the more expensive bond market.
The nation's five-year CDS narrowed to 230/250 bps from 250/265, the trader said. South Korea's five-year CDS tightened to 155/185 bps from 180/200, after the government said it would launch a $16.2 billion fund to buy bad loans from financial institutions, traders said. State Bank of India's five-year CDS, considered a proxy for India's sovereign CDS, narrowed to 190/210 bps from 200/230 bps.
Investors are optimistic that an election victory by the Congress coalition over the weekend would lead to more economic reforms in the country, including adopting prudent fiscal policies to narrow the budget deficit, traders said.