Asian dollar bond spreads narrowed for a second day on Tuesday, underpinned by views the region's economic recovery is on track, but Indonesia's sovereign debt underperformed as a planned new issue weighed on sentiment. The Asia ex-Japan iTraxx investment-grade index tightened by 2 basis points (bps) to 84/88, its lowest since mid-May 2008.
The Thomson Reuters Index of Asia emerging credit was quoted at 120.56 on a weighted average basis and at 180.91 bps based on simple average. "It's a good day for Asian fixed income," said Tim Condon, head of Asian research at ING Bank in Singapore.
"We have a feel good factor carried over from China's export data and the performance of the US stock market." Indonesia plans to sell 10-year dollar bonds at around 6 percent to raise an amount which is yet to be decided, a source said. Jakarta would focus on the 10-year deal and the amount would be decided later in the day.
Indonesia's 11.625 percent bond due in 2019 was traded at 140.25/140.875 cents on the dollar, down from 140.375/141 on Monday, traders said. DBS Bank said in a note Indonesia's dollar bonds may not do as well in 2010 after a strong 2009, but local currency debt will gain on demand from offshore investors seeking higher yields.
"With high yields and positive economic outlook, Indonesia is likely to remain a favourite of international bond fund managers," DBS said. Philippine dollar bonds recovered from a widening caused by a new issue, tracking the broad market. The 6.5 percent 2020 bond sold last week, traded at 106/106.375 cents on the dollar, up from Monday's 105.75/106.25, Manila-based traders said.
Aside from sovereign issues expected from Indonesia and Vietnam, Asian companies were also planning to raise funds ahead of an imminent rise in interest rates. Chinese developer Evergrande Real Estate has appointed banks for a planned global bond offering and would be holding roadshows starting Wednesday. State-owned Korea Export-Import Bank is also planning a dollar bond issue to pay off debt, traders said.