Asian bond spreads widened slightly on Tuesday, as investors unloaded some of their holdings to make way for new issues. State-owned Korea Hydro and Nuclear Power received more than $8 billion in orders for a sale of five-year dollar bonds, and may price the debt as early as Tuesday, a source said.
"Some funds are moving out of their existing portfolio to buy new bonds that will come out of the market," a Hong Kong-based trader said. "Korea Hydro is a quasi-sovereign name, so it's quite attractive." The Asia iTraxx investment-grade index excluding Japan widened to 163/170 basis points (bps) from 155/165 on Monday, Hong Kong-based traders said.
"This is just a correction after substantial moves recently," a Singapore-based analyst said. Last week, the index, which measures 50 high-grade credit bond spreads in Asia, narrowed to its lowest level since early September on expectations that the worst of the global downturn may be over. Unlike safe-haven US or Japanese government debt, most Asian bonds are seen as riskier assets that benefit from improved risk appetite.
The following were the major movers in cash bonds and credit default swaps (CDS): South Korea's five-year CDS widened to 145/155 bps from 130/140 bps, tracking the performance of the broader market, traders said. Philippines' cash bonds fell, as expectations that the government will revise this year's budget deficit estimate this week prompted some selling of the securities, a Manila-based trader said.
The country's 8.375 percent bond due in 2019 was trading at 116.125/116.375 from 117.375/117.875 on Monday. The nation's five-year CDS widened to 195/210 bps from 190/200, the trader said. Some investors were speculating that the deficit forecast may rise to as much as 300 billion pesos ($6.3 billion) from 199.2 billion pesos, the trader said.