ASIA CREDIT CLOSE: Indian banks outperform in thin trade

Last Updated: Mon, Aug 26, 2013 09:20 hrs

SINGAPORE, Aug 26 (IFR) - There was a better tone in Asian credit markets today, thanks to a weaker-than-expected US July new home sales statistics. The numbers, released on Friday, helped pull in 10-year Treasuries by 8bp and took away some impetus from the tapering argument of market bears.

Still, trading was extremely thin, with just scrappy sizes going through and barely any price levels indicated on broker screens as a holiday in London reduced liquidity. However, according to a trader, most of the screen prices were on the bid side, which he described as "close to where the market feels right now".

The iTraxx Asia IG index is closing out around 3bp tighter to Friday's ending level, at 157bp/159bp. According to the trader, there has been European retail buying of Asian credit, as the cheaper absolute yield levels lure private bank clients.

"The market feels short and retail likes the rates of return available, but, then, all it will take is a new issue to come and institutions will start selling again, and spreads will start to widen again.

The tapering anxiety is still there and it looks as if it will be borne out as the Fed steps back next month. This is a very fragile market," said the trader.

India was the outperformer on the day, with the 3-year to 5-year part of the curve pulling in around 10bp. The ICICI Bank 2018s are looking to close out 10bp tighter at Treasuries plus 270bp, with the India bank credit curve undergoing a period of steepening as holders look to reduce duration and convexity risk.

China SOE paper is around 2bp tighter, again with minimal flow going through.

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