Philippine sovereign bond prices rebounded from two-month lows on Friday, on optimism that the country could tap funds from Japan and the ADB to plug a budget deficit, while the broader market was also slightly firmer.
Manila on Thursday said it may cancel or delay a peso retail bond issue, raising expectations that its planned Samurai bond sale is on its way. Meanwhile, the Asian Development Bank was favourably considering the Philippines' request for a $500 million loan.
Philippines' Finance Secretary Margarito Teves said on Friday his government was looking to raise up to $1.5 billion in Samurai bonds - yen bonds issued in Japan by non-Japanese borrowers - if it can raise the money cheaply, to plug a bulging budget deficit. "The Samurai bond offering and the ADB loan are both positive developments. That means the government may no longer go back to the dollar bond market," a Manila-based trader said.
"There is also bargain hunting because prices have come off so fast in the past few days." Philippine dollar bonds fell to their lowest levels since April on Thursday as investors were uncertain about the Samurai deal, with conflicting statements from Manila and Tokyo on the size and timing of the sale.
In the broader market, the Asia iTraxx investment-grade index excluding Japan narrowed to 195/202 basis points (bps) from 200/208 on Thursday, a Hong Kong-based trader said. The index rose to its highest since May 20 on Thursday as recent US economic data painted a gloomier outlook on the economy.
Following are the major movers in cash bonds and credit default swaps (CDS): Philippines' cash bonds gained, snapping a three-day decline, with the country's 8.375 percent bond due in 2019 trading at 112.75/113.00, after falling to as low as 109.875 the previous day, its lowest since April 1.
The nation's five-year CDS narrowed to 230/240 bps from 240/250, a trader from Manila said. South Korea's five-year CDS tightened to 190/205 bps from 200/210, tracking the performance of the broader market, traders said. An assurance from government officials that there will no interest rate hike in the near term also helped boost sentiment on the country's debt, traders said.