New dollar bonds from Indonesia's Star Energy Geothermal rose on Monday, along with recent issues from two Hong Kong banks, as easing worries about the fiscal problems in Europe spurred demand for riskier assets. The Asia ex-Japan iTraxx investment-grade index narrowed 4 basis points (bps) to 124/127, traders said.
The index widened by as much as 11 bps on Friday, reflecting market concerns about debt problems of Greece and other eurozone members. The Thomson Reuters Index of Asia emerging credit was quoted at 204.73 on a simple average basis and at 143.56 on a weighted average.
"The market is focusing more on the emerging sovereign crisis in Europe as the main driver of spreads right now," said Tim Jagger, Singapore-based head of Asia Pacific credit strategy at Royal Bank of Scotland. Officials from the Group of Seven on Saturday said Greece would meet tough new targets to cut its swelling budget deficit. Greece plans to slash the budget gap to below 3 percent of GDP in 2012 from nearly 13 percent.
The overall positive tone in the market lifted Star Energy's bonds sold at par on Friday. The bonds due in 2015 were traded at 100.25/100.75 cents on the dollar, traders said. Star Energy's $350 million issue attracted $1.1 billion in total orders, a source close to the deal said. Of the total debt sold, 44 percent went to buyers in Asia, 40 percent to the United States and the rest was sold in Europe.
By investor type, fund and asset managers accounted for the bulk at 73 percent, while banks got 15 percent, the balance went to retail and other investors. Recent issues from lenders BOC Hong Kong, a unit of state giant Bank of China, and Dah Sing Bank also rebounded.
The 10-year BOC bonds were traded at 215 bps over US Treasuries, down from 220 on Friday. Dah Sing Bank's bonds due in 2020 were traded at 305 bps, down from Friday's 310, traders said. The selloff on Friday prompted India's state-run Bank of Baroda to defer its 5-year dollar bond issue. But the postponement of the Indian lender's debt sale would probably not deter other potential issuers such as Bank of India.
In Indonesia, Jakarta's Pertamina is eyeing up to $1.5 billion in bond sale. The state oil and gas firm would use the proceeds to fund capital spending this year. Asia ex-Japan raised a healthy $7.25 billion in sales of dollar-, euro- and yen-denominated bonds in January. This follows last year's aggregate of a record high $64.7 billion. February has had a flying start with volume of over $4.6 billion in the first week alone.