EM ASIA DEBT-Spreads narrow on U.S. housing data; PSALM gains

HONG KONG, Nov 24 (Reuters) - Asian debt spreads narrowed on Tuesday after U.S. home sales surprisingly jumped in October, raising the market's appetite for risky assets such as newly-issued bonds from Philippine agency PSALM.

The Power Sector Assets & Liabilities or PSALM sold $600 million of bonds due in 2024 on Monday at 100 cents on the dollar, yielding 401.4 basis points (bps) over U.S. Treasuries. [ID:nN23150455]

The Asia ex-Japan iTraxx investment-grade index <0#ITAIGMPBMK=> tightened by 6 bps to 104/109, traders said.

"The U.S. housing data had a marked impact on the market. The fear factor went down and risk appetite went up," said Tim Condon, chief economist at ING Financial Markets in Singapore.

Sales of previously owned U.S. homes surged a record 10.1 percent in October from the previous month to their highest in more than 2-½ years. [ID:nN23252398]

Condon expects the improved sentiment on the global economy to drive spreads tighter until the end of 2009.

"On balance, risk appetite will remain firm," Condon said. "Those who were in the pessimistic camp will be drawn into the optimistic camp. Their purchases will help drive market higher towards the end of the year and even to 2010."

Demand from Philippine investors lifted PSALM bonds on Tuesday, Manila-based traders said. The debt was quoted at 101.875/102.125 cents on the dollar, while the spread narrowed to around 380 bps.

"The activity is more on the PSALM bonds today than on Philippine dollar bonds," one trader said.