Asian bond spreads narrowed on Thursday, after the Federal Reserve's upbeat economic outlook lifted investors' appetite risky assets, while Indonesian bonds gained on plans to raise tax revenues. The Asia ex-Japan iTraxx investment-grade index narrowed by 4 basis points (bps) to 121/126, traders said, its lowest since August 10's 120/130.
The index has tightened since Friday and has narrowed by 14 bps since then. "The trend is steady-firming and eventually these credit spreads will re-test their all-time lows, but I am not suggesting that's going happen in the next year," said Tim Condon, head of Asia research at ING Bank in Singapore. "We are in a kind of bullish environment for credits."
Indonesia's dollar bond prices extended their gains, on optimism about the economy and the government's efforts to boost tax collections that would help narrow the budget gap, said Handy Yunianto, debt analyst at Mandiri Sekuritas in Jakarta.
Indonesia's parliament is sue to pass a revised law on value added tax (VAT) and sales tax on luxury goods next week, helping lift tax revenue. Indonesia's 11.625 percent bond due in 2019 rose to 138.00/139.50 cents on the dollar from 137.50/138.50, traders said. The country's five-year credit default swap (CDS) narrowed by 7 bps to 185/195. Elsewhere, South Korea's five-year CDS tightened by 4 bps to 122/127 bps from 132/137.