Asian bonds rally as investors return
Asian bonds rally as investors return
HONG KONG (Bloomberg): Asian bonds rallied against U.S. Treasury bonds during the past week as investors sought to buy more of the region's high yielding bonds amid improving perceptions of Asia's credit risks.
The yield premium for South Korea's benchmark 10-year global bonds due 2008 declined 25 basis points since last Monday to about 215 basis points today. The yield premium for Indonesia's 10-year Yankee bonds due 2006 has tightened about 65 basis points since last Monday to about 775 basis points.
"Sentiment in Asian credit markets is now more bullish than it has been since the start of the Asian crisis," said Chris Francis, managing director of Asia fixed-income research at Merrill Lynch Asia-Pacific Ltd. in Hong Kong.
New global bond sales by some of Asia's most active issuers, the Asian Development Bank and the Korea Development Bank, also lured investors into buying more Asian bonds.
The yield premium for KDB's new US$1 billion five-year global bonds due 2004 narrowed 10 basis points since they were sold last Thursday, to about 215 basis points more than U.S. Treasury bonds of comparable maturity.
"Last week's KDB sale was way oversubscribed with investors who received either none or only a fraction of their allocations of the new bonds forced to turn to the secondary market for paper," said James Milligan, head of Asian credit trading at HSBC Markets in Hong Kong.
These inflows of new funds into the region are even causing a rally in Asia's riskier bonds -- with credit ratings below investment grade.
The yield premium for the Philippines' 10-year global bonds due 2008 has narrowed 30 basis points to about 320 basis points more than U.S. Treasury bonds of comparable maturity. The yield premium for China's 10-year global bonds due 2008 tightened about 25 basis points to 180 basis points.
"The ongoing strong liquidity both coming out of the U.S. and in the Asia region, coupled with increased confidence that the region is moving into recovery phase has led to very strong demand" for Asian bonds, said Paul Marshall, associate director of Asian credit trading at Barclays Capital Asia Ltd. in Hong Kong.
Only India's benchmark bonds didn't take part in the rally.
The yield premium for ICICI Ltd.'s 10-year Yankee bonds due 2007 widened about 5 basis points to 380 basis points more than U.S. Treasury bonds of comparable maturity.
With the Bharatiya Janata Party-led coalition government collapsing over the weekend after losing a confidence vote, there is uncertainty about whether India's new budget for the year ending March 2000 will be passed during a parliamentary vote that begins tomorrow. Investors say this could cause yield spreads for Indian bonds to widen a further 10 to 20 basis points.