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.