HONG KONG -- Asian dollar bonds rose yesterday after strong US manufacturing data revived hopes that a global economic recovery was on track, but persistent concerns about China’s attempts to rein in excessive credit capped gains. New issues from Industrial Bank of Korea and Philippines’ Rizal Commercial Banking Corporation (RCBC) were flat to slightly higher after their offerings drew modest responses following a healthy dose of supply in January. In January, Asia ex-Japan absorbed $5.4 billion in debt sales from issues of dollar-, euro- and yen-denominated bonds. This follows a record high of $64.7 billion in 2009. The Asia ex-Japan iTraxx investment-grade index was 4 basis points tighter at 110/113 bps. The Thomson Reuters Index of Asia emerging credit was quoted at 136.49 on a weighted average basis and at 191.02 on a simple average. “We are getting headlines on tightening measures in China on a daily basis and that is having a lot of impact,” said a Hong Kong based trader, referring to Beijing’s concerns about asset bubbles and the checks on bank lending. A banking source told Reuters late on Monday that China’s banking regulator has ordered lenders to conduct checks on whether any of their loans have illegally gone into the stock or property markets. Any credit found to have been used for improper purposes must be withdrawn within a certain period of time. “There has been some volatility in general but it is surprising the bond market held up relatively well despite the correction in equity markets,” said the fund manager. The 90-day correlation between the Asia ex-Japan iTraxx investment-grade index and the MSCI index of Asia Pacific stocks outside Japan has declined to 0.78 from 0.86 at the start of the year. It is lower than the-200 day correlation which is still around 0.96. In the new issue market, Industrial Bank of Korea’s $350 million offering received more than $1.1 billion in orders. Its 5-year bonds were trading at 204/206 basis points above Treasuries after they were priced at 205 bps over. RCBC’s bonds were trading at 100.625 cents after the $250 million sale logged an order book of $1.1 billion. The bonds due in 2015 were sold at par for a yield of 6.25%. The issue was predominantly sold to Asia, which comprised 91% of the offering while Europeans took 9%. Philippine buyers accounted for 40%. By investor type, banks took 23%, funds 30%, retail investors 43% and 4% went to others. Trading in sovereign bonds from the Philippines, Asia’s most prolific bond seller, was subdued. The 2034 bonds were trading slightly weaker at 94/94.50 cents on the dollar. In the new issue pipeline are offers from Indonesia’s PT Chandra Asri, India’s Bank of Baroda and South Korea’s Hyundai Card. -- Reuters

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