Asian bond spreads narrowed on Friday after two straight sessions of widening, as stock gains lifted appetite for riskier assets, which also benefited newly-issued debt from Noble Group. The Asia ex-Japan iTraxx investment-grade index narrowed by 5 basis points (bps) to 100/105, a Singapore-based trader said. The index has widened by around 10 bps in the last two days, as weak equities sidelined investors.
"All asset classes are doing well today," a trader said. "Those who are waiting in the sidelines are picking up paper." Commodities company Noble Group sold $850 million of debt due in 2020 at 99.105 cents on the dollar, yielding 344.5 basis points (bps) over US Treasuries. The bond was quoted at 99.50/99.75 in Asian session, traders said.
Noble's deal attracted $4.8 billion in orders, a source said. Of the total debt sold, 57 percent went to the United States, 30 percent to Asia and 13 percent to Europe. By investor type, asset and fund managers accounted for 65 percent of total sales, insurers and pension funds 14 percent, banks 17 percent, and others 4 percent, the source said.
Unlike Noble, issues from Lumena Resources and State Bank of India have not been so well received. Both performed poorly in their trading debuts in Asia this week. "The overall market condition is a bit better today, that's why Noble got a better reception" than Lumena and SBI, another trader said. Philippine bonds rebounded from a two-day fall, but concerns about more debt sales capped their gains, a trader from Manila said.
The country's 6.375 percent debt due in 2034 sold last week, was traded at 99.375/99.50 cents on the dollar, up from as low as 99.125 on Thursday. More high-yield issues are expected to tap the market, following Lumena, which raised $250 million on Wednesday.
"Since the beginning of this year, we have seen a number of new issues coming from high-grade issuers, particularly South Korean (firms)," said Nancy Koh, head of Asian corporate research at BCP Securities in Singapore. The market will be keeping an eye on planned dollar bond sales from India's Axis Bank and South Korea's Hyundai Capital. Both firms are due to meet investors in Asia, the United States and Europe from next week.