ASIA CREDIT CLOSE: New Baidu paper rallies as credit spreads tighten

Last Updated: Wed, Nov 21, 2012 09:00 hrs

SINGAPORE, Nov 21 (IFR) - Trading volumes thinned in Asian credit markets today, ahead of the Thanksgiving holidays that start in the US tomorrow. Most of the flows were seen around the only new issue in town from China's search engine Baidu, which rallied in a pretty quiet but fairly positive market.

The Baidu 2017s were pushing in to 142/138bp over US Treasuries, tighter than the 142/140bp seen on the break, while the 2022s were seen at 175bp/170bp, a touch wider from the 171/168bp. The levels are about 10-18bbp from the issue spreads of 160bp and 185bp that the five- and 10-year bonds priced at last night.

One plausible reason for the strong rally could be that few supplies are seen in Asian hands as most of the bonds were sold into the US markets, and the under-allocated Asian bid were trying to get their hands on some.

As the Baidu bonds firmed, it had a spillover effect on its Chinese peer Tencent, which saw its 2016s tighten as well. The 2016s of China's biggest Internet company by revenues were trading around T+240bp yesterday, but trades were done at 205bp this morning and were quoted at 205/215bp by the mid-afternoon session. The 2018s were quoted at 235/225bp.

The general positive sentiments in the Asian markets as well as Olam's vigorous defence of its integrity probably lifted its 2017s to 93/94, almost back to where the bonds were before Muddy Waters created a ruckus with its negative comments on the commodities trading company.

Olam held a bondholder conference call earlier today, details of which were unknown but it injected some confidence back into its bonds. That confidence was also fed by some analyst reports which today concluded that Olam was unlikely to collapse, contrary to the view of Muddy Waters.

"There was a bit of a wobble during lunchtime when news that European officials failed to reach an agreement on Greece emerged but the markets managed to shake that off," said one Singapore-based credit analyst.

It was a more active day at the credit spreads in Asia with brisk two-way flows dominated by fast money although it would have been hard to tell from the marginal tightening in credit spreads.

The Asia iTraxx IG 18 pushed in 2bp to 120/122bp by the end of the day with the more liquid benchmark sovereigns seeing a 3bp tightening in the Philippines, Indonesia and Vietnam to 100/105bp, 125/130bp and 198/208bp.

More from Sify: