ASIA CREDIT CLOSE: Gains tempered by headline fears - IFR

Last Updated: Mon, Apr 08, 2013 09:30 hrs

SINGAPORE, April 8 (IFR) - Asia credit markets were solid, if lacklustre, today, amid North Korean geopolitical risk concerns and the fear that questions surrounding Portugal's austerity plan would ramp up eurozone tail risk again.

From a regional perspective, with the flow of new issuance set to pick up, there are fears that new supply could weigh on spreads given the roughly USD6bn of recent supply that has yet to be absorbed. The iTraxx IG index is looking to close out at 120bp bid or 1bp tighter on the day.

A regional trader noted that there is a powerful bid for duration in the wake of the Bank of Japan's mammoth QE measures and that, with 30-year JGBs below 1% for the first time ever, anything with a yield north of that looks like value.

Still, despite the duration bid, this year's supply of perps is still struggling, with the exception of Petron, which is bid at 102.75. The Agile perp is mired at 92.5 bid, while the Reliance perp is at 98.25.

A standout today has been the Kexim and KDB curves, which are around 5bp-10bp tighter, largely on the back of short covering. Investors traded out of the Korea FIG sector last week in response to North Korea's sabre rattling.

Elsewhere, real money has been nibbling at high-yield, which is around 12.5ct to 37.5ct better, as investors look for yield after non-farm payroll data sparked a US Treasury rally.

The India FIG curve is awaiting possible issuance from State Bank of India, with some players concerned that a cheaply priced deal would reprice the entire curve.

Meanwhile, the planned 10s/30s issuance from the Republic of Indonesia has put pressure on the Philippines and Indonesia offshore curves, out 7bp-8bp and around 10bp, respectively.

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