ASIA CREDIT CLOSE: Investors pause ahead of NFP; Mongolia rebounds

Last Updated: Thu, Dec 06, 2012 09:10 hrs

SINGAPORE, Dec 6 (IFR) - Liquidity dried up today as investors paused to assess the market ahead of tomorrow's nonfarm payrolls report in the United States. Traders at both high-yield and high-grade desks reported a very quiet session with hardly any quotes even making the screens.

The tone was negative, though, as the Asia iTraxx IG Series 18 index was wrapping 1bp wider in the day at 113bp/115bp, though the widening was felt more on the offer side.

Indeed, a good measure of how liquidity was reduced was the fact that most bid-ask spreads were wider in the day, gapping up to 25ct more on the high-grade and gaining some 50ct on the high-yield space.

In spite of the lack of activity and the downbeat mood, Mongolia's bonds rebounded with the 2018s quoted at 97.50/98.50 and the 2018s around 98.15/99.15. This was a steep recovery from levels as low as 93.50 and 94.50 for the two bonds respectively.

The recently priced bonds had come under pressure yesterday -- which also happened to be their settlement date -- amid reports that the Mongolian People's Revolutionary Party was quitting the governing coalition, a move that could cause the government to fall.

Following the news, fast money was said to have sold their bonds. However, today institutional investors were picking them up, which boosted prices by as much as USD5. The bonds are still below reoffer of 99.996 and par and have not recovered to the 101.50/102.00 which they reached shortly after being priced, though.

If Mongolia was getting back on the saddle, Singapore real-estate concern Keppel Land continued its slide. The USD250m 7-year bond priced on Tuesday widened another 5bp today closing around 280bp over the 5-year US Treasury.

There was some piecemeal buying of other bonds, with private banking clients still favouring Chinese property names. Institutionals were also seen picking loose bonds in that space as they begin to position for year-end.

This moved most bonds in that sector about 25ct higher in price yet again, continuing a tightening trend that has built-up over the course of the past twelve months.

Meanwhile, Hon Hai Precision was in the market with a benchmark-sized USD-denominated 5-year Reg S only bond talked at 190bp over. The books were over USD1.5bn in the middle of the afternoon suggesting the company would be able to comfortably price a USD500m deal if it chooses to.

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