Asia dollar bonds thrive again with $4bn Indonesia issue

An Indonesian state-owned mining company has sold a landmark $4bn bond, as the Asian dollar note market gets back in business with investors reassured that US midterm elections brought few surprises.

PT Indonesia Asahan Aluminium, known as Inalum, sold the four-part bond, the biggest-ever dollar corporate security from a non-financial issuer in the country and among the largest in the Asian market this year, according to data compiled by Bloomberg. The price of the notes jumped in trading on Thursday, as traders said they were offered at an attractive price.

The Asian dollar bond market, which had been quieter earlier in the week ahead of the US vote, roared back to life on Thursday. Speculation that US-China trade tensions could ease helped, after Chinese Vice President Wang Qishan told Bloomberg’s New Economy Forum in Singapore that Beijing remained ready to discuss solutions to the trade war. Half-a-dozen issuers including Chinese search engine giant Baidu Inc and Thai Oil Pcl began the process to sell dollar securities on Thursday.

“Risk appetite is better now that the uncertainty is out of the way after the midterm elections,” said Leo Hu, Singapore-based senior fund manager at NN Investment Partners. “The market is rallying in anticipation of the easing in trade tensions. We think ties between China and the US are warming up and there is a potential for a cease-fire.”

The average yield premium that investors demand to hold emerging Asian dollar bonds over Treasuries has fallen from a more than two-year high hit last week.

Sentiment toward emerging-market debt improved after the Democrats reclaimed the US House of Representatives, with the divided government raising speculation that gridlock could take some steam off the rally in the dollar.

That has yet to happen in any clear way, as the US currency steadied Thursday and Treasury yields held gains.

Still, the successful Inalum deal brought a sense of relief. Junk notes from the nation’s borrowers had been among the worst performers this year.