SINGAPORE, March 7 (IFR) - Investment-grade credits ended
the day tighter as bonds in the region failed to emulate a spike
in US Treasury yields overnight and compressed spreads.
The yield on the 10-year US benchmark rose 4bp yesterday as
US investors bet on a strong nonfarm payroll number tomorrow.
The risk-on trade also boosted CDS and the Asia ex-Japan
iTraxx Series 18 ended the day 2bp tighter, quoted at 109bp
mid-market. Cash, however, also outperformed US Treasuries, and
the long-end Philippines bonds were down only 25ct, meaning the
spread on the sovereign was 2bp-3bp tighter on the day.
Indian banks also saw some select interest as investors
covered short-bets set up in the wake of the budget announcement
last week. HDFC's recently issued 2018 bonds were some 4bp
tighter, quoted at 228bp, still wide to the 220bp reoffer spread
printed last week, but better than the 232bp-235bp seen earlier
The underperformer in the IG arena was the long bond from
AIA Group, which widened further. While its new 2018 bond closed
at 110bp/108bp, inside the reoffers spread of 110bp, the 2023
widened some 3bp in the day closing at 140bp/138bp, also much
wider than the 130bp reoffer spread.
Still, high yield was the clearest beneficiary of the risk
appetite. Chinese property bonds were up 25ct, on average, in
price terms and some of the names that had taken the most
beating were seeing gains of 50ct. Soho China's 2017s, for
instance, were up 50ct quoted at 99.15 mid-market. Shimao's
2020s also were better bid, ending the day some 25ct stronger at
"We are back to where we started the week," said one
analyst, pointing out that the Chinese property sector had fully
recovered the losses seen in the first half of the week after
policymakers announced a series of measures to cool the property
China Vanke (BBB/BBB+) was riding the positive sentiment
towards the sector and had already logged in more than USD6bn in
orders for its USD800m 10-year bond being offered at 200bp area.
"This will perform well," suggested the analyst.