Sept. 27 (Bloomberg) -- ICICI Bank Ltd. bonds rose after a $2 billion debt sale by India's biggest lender to consumers underscored a revival in Asian credit markets.

The yield on the bank's 6.625 percent bonds due October 2012 fell by 15 basis points to about 6.5 percent at 11.57 a.m. in Singapore, according to Merrill Lynch & Co. The price increased by 0.624 cent to 100.54, Merrill Lynch data show.

ICICI and borrowers including Macquarie Bank Ltd. and Rams Home Loans Group Ltd. in Australia sold dollar-denominated bonds after the U.S. Federal Reserve cut the benchmark rate for overnight borrowing by half a percentage point to 4.75 percent on Sept. 18. The reduction bolstered confidence that stability might return to credit markets roiled by losses in securities linked to U.S. subprime mortgage loans.

``The Fed rate cut certainly helped in improving the sentiment,'' said Ting Wee Ming, who helps manage $2 billion of global emerging market debt at Pictet & Cie in Singapore. ``Otherwise, I don't think the appetite can improve as quickly and ICICI might not have been able to issue such a large size.''

Investors placed orders for about $6.1 billion of ICICI's bonds, with those in the U.S. accounting for almost half of the demand, according to an e-mail sent by one of the arrangers today.

Macquarie, Australia's largest investment bank, boosted the sale of mortgage-backed bonds by 67 percent to A$500 million ($438 million) last week.

`Generous Spread'

Rams, a Sydney-based lender which failed to refinance A$6.18 billion of short-term debt in the U.S. last month, is selling A$242.5 million of mortgage-backed bonds.

ICICI's 6.625 percent of five-year notes were issued at a discount of 99.916 cents on the dollar to yield 237.5 basis points more than Treasuries of similar maturity, according to data compiled by Bloomberg. A basis point is 0.01 percentage point.

The ``generous spread'' helped attract investors to the securities, Ting said in an interview.

Investors demand an extra yield, or spread, of 2.24 percentage points to own ICICI's 5.75 percent bonds maturing in 2012 rather than Treasuries, more than double the premium of 1.03 percentage points on June 1, according to HSBC Holdings Plc.

ICICI's five-year credit default swaps fell to 118.5 basis points, from 125 basis points yesterday, according to ABN Amro Holding NV. A basis point is worth $1,000 on a swap that protects $10 million of debt from default.

Credit-default swaps, financial instruments based on bonds or loans, were conceived to protect bondholders by paying the buyer face value in exchange for the underlying securities should the borrower default. A fall in the price indicates improving investor perceptions of credit quality and an rise suggests deterioration.

Growing Credit Demand

The Mumbai-based bank has been raising funds to meet growing credit demand in the world's fastest-growing major economy after China. India's central bank estimates the $875 billion economy will grow 8.5 percent in the year to March 31.

ICICI raised $5 billion in June in India's biggest share sale and got a $1.5 billion loan, a record by an Indian bank, this month. It has sold $4 billion of bonds since January, the most in a year since Bloomberg started collecting data in 1999.

ICICI is rated BBB-, the lowest investment grade, by Standard & Poor's and one level higher at Baa2 by Moody's Investors Service.

Goldman Sachs Group Inc., Deutsche Bank AG and Merrill Lynch & Co arranged yesterday's debt sale.

To contact the reporter on this story: Denise Kee in Singapore at dkee2@bloomberg.net

Last Updated: September 27, 2007 00:56 EDT