Indonesian bonds gain popularity

Indonesian bonds gain popularity

SINGAPORE (Dow Jones): Spreads on Asian benchmark bonds were mixed this week, with longer-dated Philippine government paper surrendering some of the gains made in last week's rally.

Spreads on many issues across the region were unchanged. The best performers were Indonesian and South Korean sovereign debt, which saw spreads over yields of comparable U.S. Treasurys narrow modestly.

The Philippine bond of 2019 was hit by a wave of selling late in the week. Its spread widened by 11 basis points to about 767 basis points, after narrowing by 112 basis points the previous week.

"In the Philippines, risks have continued over the past few days," Raja Visweswaran, head of fixed income research at BA Asia, said in a research note.

"As we pointed out before, the market's rally in the past two weeks did risk coming up against a wall of impatience in the event that the president dug in and refused to quit," he said.

Philippine markets have been buffeted for the past month by corruption allegations against President Joseph Estrada and calls for his resignation. Estrada has steadfastly denied the charges.

Investor sentiment toward South Korean sovereign debt was helped by efforts to restructure banks and other corporations, analysts said.

The South Korean bonds due 2008 were about 3 basis points tighter compared with a week ago. The spread on the 2003 issue was unchanged.

However, analysts cautioned that trouble at Hyundai Electronics Industries Co. could put some pressure on South Korean corporate debt. Hyundai Electronics said it is seeking to raise 3 trillion won (US$264 million) in loans and from asset sales before the end of the year.

The Indonesian government bond of 2006 continued to gain popularity among investors. Its spread narrowed by 13 basis points following a shrinking by 28 basis points the week before.

Indonesia debt got a boost from the Jakarta Initiative Task Force's announcement this week that it would restructure about $2 billion in corporate debt.

Elsewhere, the Malaysian government bond of 2009 widened by 2 basis points, as did the China government bond of 2008.