SINGAPORE, Nov 19 (IFR) - Asian credit markets tightened
today as investors in the region bet that markets would rally in
the rest of the world after US lawmakers gave indications they
might be able to reach a deal with the Barack Obama
administration to avert the fiscal cliff and officials in Europe
hinted that Greece will get more aid.
As a result, the Asia iTraxx IG Series 18 ended the day some
4bp tighter at 125bp/127bp. The five-year CDS for China,
Philippines and Indonesia also ended all 3bp-4bp tighter on the
back of the good mood in the market. "We have seen two weeks of
weakness so it was about time for some positive consolidation,"
said one trader in Singapore.
The movement was stronger on the derivatives side, however,
than on cash, as investors are not very keen on actually buying
bonds going into the end of the year. Hence, cash bonds ended
the day little changed in price but some 2bp-3bp tighter as a
result of higher US Treasury yields.
This also was seen as an indication that the positive move
was not due to a short-squeeze. "No dealers seem to be short as
no one is putting their balance sheet on the line," said the
trader. "But overall, positioning is very light."
One analyst in Hong Kong said that there was a little bit of
buying in select names in the high-grade space as clients were
indicating that they wanted to take profits on high-yield and
allocate more to investment-grade.
The move buoyed Indonesia's new 10-year sukuk, which
returned to par after dropping below that in slim trading on
Real money and retail accounts were seen nibbling at some
high-yield bonds, but fast money was just taking profits to
lock-in gains after a very good run this year. That movement was
not very convincing, though, and seemed concentrated on bonds
that had been more punished lately.
There was some buying of the new Soho China 2017s after they
were bid at 95.00 last Friday, USD5 below their reoffer print
just three weeks ago.
Those bonds ended at 96.50/96.90 today. However, investors
still failed to see value on the 2022s of the issuer, even as
they trade USD6 below reoffer, and they finished the day still
quoted at 94.00/94.50.
"The deal was priced too tight, especially on the long-end,
there still is room to widen," said one analyst.
Otherwise, however, investors were not buying much on the
high-yield side and the asset-class did not get much of a boost
from today's upbeat mood. Most of the bonds in that space ended
the day unchanged, analysts said.