EMERGING DEBT
Asian bond spreads flat despite slide in oil prices
Reuters
First Posted 15:48:00 07/24/2008
HONG KONG -- Asian bond spreads were flat Thursday despite sliding oil prices and the improving tone in global stock markets, as credit investors remained unconvinced about a definite turnaround from the recent volatility.
Still, spreads in the region have tightened considerably this week, following days of turmoil caused by concerns over US mortgage lenders Fannie Mae and Freddie Mac, as well as the failure of US lender IndyMac Bancorp Inc.
Asian issuers could venture forward with debt sales should credit markets retain this week's positive tone, bankers and traders say.
Hong Kong & China Gas plans to sell bonds in one or more tranches, in what could be the first major dollar debt sale since Philippine conglomerate's SM Investment's $350-million bond offering on July 10.
"The tone definitely keeps improving with equity markets gaining, but activity is still really slow," said a Hong Kong-based trader.
"People are not actively trading. They are waiting for markets to stabilize a little more."
The iTRAXX Asia ex-Japan high-yield index, a key measure of risk aversion, widened by a couple of basis points (bps) to 520/525, after a rally on Wednesday that saw spreads move in by about 20 basis points in a single session.
That is below the record 650 hit in mid-March in the run-up to the rescue of US investment bank Bear Stearns, and also below the monthly high of 580 hit on July 8.
The iTRAXX investment-grade index remained range-bound at 130/135 after tightening by some 12 bps the previous day.
OIL SLIDES
This week's slide in oil prices have contributed to the rally in Asian credit spreads, easing concerns over surging inflation.
US benchmark crude futures edged down to $124.39 a barrel as of 0610 GMT on Thursday, continuing to back away from a record above $147 on July 11.
Asian sovereign spreads eased or remained flat for the most part after data on Wednesday from Australia and Singapore offered some signs that headline inflation could be nearing a peak amid slowing economic growth.
The tone improved even for Malaysia, which posted inflation data on Wednesday that far surpassed market expectations. Its five-year credit default swaps (CDS), or insurance-like contracts that protect investors against defaults, narrowed by 5 basis points to 100.
Vietnam's five-year CDS were range-bound around 290, despite saying on Thursday inflation climbed to 27 percent in July, highlighting price pressures that could intensify after this week's fuel price rise.
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