Philippines sovereign bonds rebounded on Monday, snapping four straight days of losses, as investor concerns about a wider budget deficit eased, while the broader market was little changed. "Philippine bonds have fallen so much in the recent sessions, so some investors, particularly offshore players, are bottom-fishing," a Manila-based trader said.
The Asia iTraxx investment-grade index excluding Japan was flat at 167/177 basis points (bps), traders in Hong Kong said. It has narrowed sharply from a record high of 630-650 bps posted in late October. Latest data that showed US consumers were starting to worry about the outlook for inflation, which could slow any recovery in the global economy, also kept investors from taking more risks, traders said.
Unlike US or Japanese government debt, most Asian bonds are seen as riskier assets that benefit from improved risk appetite. "Overall, Asian credits still offer an adequate risk reward, but any significant tightening in the spreads will be difficult," a Hong Kong-based credit analyst said. "There are some inflation concerns that are emerging, though it's still premature to talk about that right now."
Following are the major movers in cash bonds and credit default swaps (CDS): Philippines cash bonds rose, as fears about a bigger deficit abated. The country's 8.375 percent bond due in 2019 was trading at 115.375/115.625 from 114.75/115.00 on Friday, a trader from Manila said. The debt had fallen from a peak of 188.00 early last month.
Bond prices fell in the last four sessions after the government raised its 2009 budget deficit estimate to a record 250 billion pesos, triggering speculationst that the country would soon tap the overseas debt market. "The possibility that the Philippines will go back to the global bond market has not been fully priced-in," the trader said. "But we won't see any major movement until we see a concrete action from the government.
The nation's five-year CDS narrowed by 5-10 bps to 205/225, the trader said. South Korea's five-year CDS was little changed at 160/175 bps, tracking the performance of the broader market, traders said. Investors were also sidelined by expected new issues from South Korean firms such as Korea National Oil Corp and Export-Import Bank of Korea.