ASIA CREDIT CLOSE: Indian banks recover losses, IG rallies

Last Updated: Fri, Mar 15, 2013 09:40 hrs

SINGAPORE, March 15 (IFR) - Indian banks recovered most of yesterday's losses as real-money investors began to snap up their bonds in secondary. The 2018s of ICICI Bank tightened 10bp to 248bp/245bp, while the 2017s of Axis Bank gained 5bp to close at 260bp/250bp.

ICICI's recovery brought the bonds almost back to where they were before a damning local media report accused some of India's private banks of facilitating money laundering. Axis was still 5bp wider to its Wednesday levels, but was still tightening near the close.

"Private banking accounts and fast money were selling the bonds yesterday, before some big guys started snapping them up and they reversed," said one trader in Singapore.

Overall, however, investment grade tightened 2bp-3bp, which, added to a similar action yesterday, brought the gains in the asset-class to some 4bp-5bp over the past two days. Traders said that, after a bout of selling earlier in the week on the back of rising Treasury yields, accounts were buying IG credits left and right.

"Real money, fast money, private banks, everyone was buying, or covering shorts, I am not sure why, but they were buying," said the trader.

As a result, the Asia ex-Japan iTraxx IG Index ended the week at 99bp/101bp, some 5bp tight to where it was Monday.

One hedge fund manager offered a glimpse of what may be happening, saying that the news flow from the United States is expected to shift for worse and the uncertainty in Europe is brewing again as the Italian Parliament convenes to determine what will be made of the country's government.

"All the stock indices have been hitting all-time highs, I expect a correction soon," the manager said.

The manager also said the yield on the 10-year US Treasuries seemed to be in a very clear, albeit wide, range of 1.8% to 2.1%. So, as it touched the upper portion of the range, investors started to buy IG again. "You have to play the range, buy at 2.05% and sell at 1.9%," said the trader.

On the high-yield side, bonds ended on a positive note, even as the strength of the rally in stock markets began to flag. Chinese property names were, on average, USD1 higher in price terms on Friday than where they started the week. The newly minted 5-year bonds of Kaisa Group, printed at par, were traded at 101.85 mid-market and the recently reopened 2018s of Glorious Property Holdings were last quoted at 100.35/100.65, higher than the par reoffer printed this week.

The only underperformers were the bonds of Winsway and Hidili, as investors sold their paper in the wake of a coalmine explosion in the Guizhou Province in China that left dozens dead and caused concerns about upcoming liabilities for coalminers in the PRC. Hidili's 2015s dropped some USD6 in price terms to close quoted at 68.00/72.00 and Winsway's 2016s were some USD2 down quoted at 80.00/82.00.

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