Several Asian sovereign credits received a boost today from the signing of a new trade agreement between several countries in the Americas and Asia.
The Trans-Pacific Partnership, sealed on Monday, will boost the economies of countries like Malaysia and Vietnam, but could come at the expense of other nations in the region.
Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico,New Zealand, Peru, Singapore, the US and Vietnam are the countries that the TPP covers, accounting for around 40 percent of the global economy.
The agreement, for example, will open up opportunities for Malaysia, which does not have any free-trade agreements with the US, Canada or Mexico.
This morning, Vietnam's sovereign bonds due 2024 tightened 19bp to 333bp over US Treasuries, from T+352, and Malaysia's 2025 sukuk narrowed 4bp to T+156. The due 2023s of TemasekHoldings, a proxy for the Singapore sovereign, tightened 2bp to T+79bp.
The Japan iTraxx tightened 10bp in early trading and the Asia iTraxx investment-grade index narrowed 9bp, while the Australian index came in 5bp.
"The TPP will serve as the catalyst for advancement and provide an important framework and opportunities to enable businesses to achieve new growth," said Ho Meng Kit, CEO of theSingapore Business Federation.
The SBF notes that the agreement has special provisions to bring small and medium-sized businesses into the global supply chain.
The TPP could be a setback for the likes of China and India, which are not included.
"One belt, one road and the Asian Infrastructure Investment Bank need to kick in," said a bond investor, referring to China's Silk Road program and the new development bank, headquartered in Beijing.