ASIA CREDIT CLOSE: Deep illiquidity in a market struggling to find direction

Last Updated: Mon, Dec 10, 2012 09:10 hrs

SINGAPORE, Dec 10 (IFR) - The usual Christmas season secondary market slowdown is upon us, with the only noticeable development to catch the eye coming in the form of Vingroup's planned 5 NC 3 US dollar Global.

That trade has been tabled as this week's business by leads Citi and Credit Suisse and might well end up as the final print of the Asia G3 year.

In secondary, the bias has been towards buying, according to a Singapore-based trader, but he noted that even if a sell ticket of the magnitude of US$2m comes through, that's sufficient to encourage Street selling, albeit with the overarching theme of super illiquidity.

The Asia IG index is looking to close out around 1bp wider at 113bp/115bp with the trader suggesting that it wouldn't surprise him to see the index break through the 100bp area before the end of the year.

Still, by way of hedging his bets he noted that a widening to 125bp was equally possible, given the market's illiquidity and the sense that there is no big theme driving the price action and that the market is struggling to find direction.

Macro data from the US were better than expected, with CPI, retail sales and payrolls coming in above initial estimates. This should be supportive, although over the medium term, fiscal cliff noise is expected to get louder and presents the key downside risk hanging over markets.

In an indication that there is a degree of underlying market fragility, the recently issued Han Hai Precision 2017s reversed some of their recent gains and last printed at the bond's reoffer bid.

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