ASIA CREDIT CLOSE: Bonds flatline under the shadow of rising UST

Last Updated: Mon, Mar 11, 2013 09:20 hrs

SINGAPORE, March 11 (IFR) - There was a broadly constructive tone in Asian credit markets today, although some skittishness is emerging towards the future direction of US Treasury yields.

Some market participants see the 2.15% yield point on the 10-year Treasury as a tipping point when large-scale convexity selling is likely to emerge with the potential to initiate a spike in yields.

The unexpectedly strong 263,000 addition to US non-farm payrolls in February and a decline in the unemployment rate helped push up 10-year yields 5bp, close to a 12 month high. There was a further 1bp rise in Asia today.

Against this background, although secondary Asia credit is mostly unchanged to moderately better bid today, it is unsurprising that just one deal that of Wheelock Properties is live in the primary market.

Also, the primary Asia G3 market has to absorb new paper of USD4.8bn brought last week and it is not surprising to see issuance taking a breather. In generally illiquid trading conditions, the Asia iTraxx IG Index is 1bp tighter at 99bp/101bp.

Last week's new issuance looks to have been appropriately priced for the most part, with the big deals for Bharti Airtel (USD1bn) and China Vanke (USD800m) holding up. Bharti was last up at 101.375 bid off a par reoffer, while Vanke was in at Treasuries plus 186bp bid from a plus 195bp reoffer. Still, both were mostly unchanged in the day.

Asian credit markets are also keeping a wary eye on China's macroeconomic data with weekend releases of CPI, retail sales and bank lending disappointing and fears are growing that a policy tightening is around the corner.

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