Bonds from Sri Lanka and Korea Electric Power Corp (KEPCO) rose on their Asian debut on Tuesday, underpinned by strong demand from investors, while the broad market was steady, tracking equities. The Asia ex-Japan iTraxx investment-grade index was little changed at 119 bps, traders said. Sovereign credit default swaps (CDS) were also steady.
Broad market steady, tracks Asian equities Asian stocks were flat, with the MSCI index of Asian shares outside Japan down 0.1 percent at 0344 GMT. Sri Lanka's new 10-year bond was traded at 101.25 cents on the dollar, versus its issue price of par.
The strong demand was also driven by the upgrade in Sri Lanka's sovereign rating by Standard & Poor's last week and on optimism about its growth outlook, de Mello said. Sri Lanka sold $1 billion of 10-year bonds at a yield of 6.25 percent, the lower-end of its final guidance of up to 6.375 percent. The deal drew $6.33 billion in orders, central bank governor Ajith Nivard Cabraal said.
KEPCO's new 5-year bond was traded 177 bps over US Treasuries, versus its issue price of 180 bps, the lower end of its final guidance of up to 185 bps above US Treasuries. KEPCO sold $700 million of 5-year bonds on Monday and a source said the deal received $1.7 billion in orders. US investors accounted for 63 percent of total sales, Asia 27 percent, and Europe 10 percent. Fund managers took 54 percent of total debt sold, insurers 19 percent, central banks 10 percent, private banks 10 percent and the rest by banks and others.
Expectations that the Federal Reserve will keep its interest rates low at near zero for an extended period and that policy makers will infuse more funds into the system are sending investors into high-yielding emerging market debt. Traders expect more issuers to follow such as Korean automaker Hyundai Motor Co and steel maker POSCO, as well as medical device maker China Medical Technologies Inc and Chinese developer Zhong An Real Estate.
Philippine sovereign bonds dipped as the government was expected to issue new debt along with its planned bond swap. The country's bond due in 2020 traded at 119.375 cents on the dollar from 119.625 on Monday, local traders said. The iTraxx SovX Asia Pacific index, which tracks the 5-year sovereign credit default swaps of 10 countries in the region, was steady at 112 bps, traders said. The investment-grade Markit iTraxx Europe index jumped to 113.25 bps from 110.75 in London on Monday.