Singapore, other regional sovereign bonds rise on TPP agreement

US Trade Representative Michael Froman (centre) is flanked by international counterparts during a press conference after the Trans-Pacific Partnership agreement was signed in Atlanta on Oct 5.
US Trade Representative Michael Froman (centre) is flanked by international counterparts during a press conference after the Trans-Pacific Partnership agreement was signed in Atlanta on Oct 5.PHOTO: EPA

SINGAPORE (REUTERS) - Several Asian sovereign bonds received a boost on Tuesday (Oct 6) 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 like China and India which are not included.

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 per cent 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 19 basis points to 333bp over US Treasuries, and Malaysia's 2025 sukuk narrowed 4bp. The due 2023s of Temasek Holdings, a proxy for the Singapore sovereign, tightened 2bp.

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 the Singapore Business Federation.

The SBF notes that the agreement has special provisions to bring small and medium-sized businesses into the global supply chain.