HONG KONG, June 14 (IFR) - Asian credit spreads tightened on
Friday as risk assets rebounded globally, but the mood was still
cautious as emerging market bond funds saw a bigger redemption
this week than the week before.
Asia IG iTraxx index was around 139bp, wider than
"We are trading tighter, but I think people are still
looking for an opportunity to sell. We are still not out of the
woods yet as redemption continues," said a Singapore-based
"The key word today is can you give me a better bid." Even
though there was a reversal in risk sentiment, data on
redemptions capped the enthusiasm.
EM bond funds saw redemptions of USD2.5bn in the week up to
June 12. That's another USD1bn more than the previous week's
USD1.52bn of outflows.
Hard currency funds saw USD1.4bn of outflows - the highest
nominal level on record, though, based on assets under
management, the 1.24% of redemptions was much less than the
nearly 3% suffered in September 2011.
Despite the outflows, funds were still investing.
Indonesia's 2043s were quoted at 86.5 last night but portfolio
managers were buying at 91, traders said.
"It feels to me like Asian sovereign CDS has been quicker to
move and reflect market sentiment than cash this week," said
Indonesia CDS was at 207bp from 240bp yesterday, while the
Philippines was at 111bp.
All eyes are now on the outcome of the two-day Fed meeting
on June 18-19, which will give a clue about the Federal
Reserve's stimulus plans.
Traders are also keen to see some action in the primary
market. Only one deal priced last week after a gap of two weeks
when no deals printed. But traders also said that its better not
to price a deal now and risk it widening in secondary because
that would deteriorate sentiment further.