Asian bond spreads narrowed on Wednesday as an improving global economic outlook lured investors into riskier debt, including newly-issued bonds from Hutchison Whampoa Finance Ltd Hutchison Whampoa Finance, a unit of ports-to-telecom conglomerate Hutchison Whampoa, on Tuesday sold $2 billion of 6-year bonds and $1 billion of 10-year debt.
It had originally planned to sell a total of $2 billion of 2015 and 2019 bonds. The 6-year bond was sold at 99.829 cents on the dollar, yielding 227.5 basis points (bps) over US Treasuries. The 10-year debt was sold at 99.423 cents on the dollar, to yield 235 bps over US Treasuries.
The bonds were trading higher in Asia on Wednesday, with the spread on the 4.625 percent bond due in 2015 tightening to 212/215 bps, traders said. The 5.75 percent bond due in 2019 tightened to 225/230 bps. Hutchison Whampoa's five-year credit default swap (CDS) tightened by 5 bps to 85/90, traders said.
In the broader market, the Asia ex-Japan iTraxx investment-grade index narrowed by 7 bps to 124/130, its lowest since August 10 when it was at 120/130, traders said.
"Most Asian credits are coming alive today. Philippines and Indonesia are quite strong today. There is more evidence that the global economy is on the road to recovery," a trader said. Traders said market optimism was boosted by comments from International Monetary Fund Managing Director Dominique Strauss-Kahn who said the global economy may recover three months earlier than forecast. The IMF had earlier predicted a recovery in the first half of 2010. The IMF has revised up its economic forecast for this year and next in major industrialised economies and worldwide.
The Philippines' 6.5 percent bond due in 2020 was trading 104.75/104.875 cents on the dollar, up from 103.375/103.875 on Tuesday, a Manila-based trader said. Indonesia's 11.625 percent bond due in 2019 rose to 137.50/138.50 cents on the dollar from 135.25/136.25, traders said. Elsewhere, South Korea's five-year credit default swap (CDS) narrowed to 125/130 bps from 132/137.