ASIA CREDIT CLOSE: Indian credits firmer, while China bonds sink

Last Updated: Wed, Mar 19, 2014 08:50 hrs

SINGAPORE, March 19 (IFR) - China real-estate bonds continued to take a hit over concerns that a small Chinese property company's potential loan default may be the tip of an iceberg.

China investment-grade property cash bonds widened another 5bp, while high-yield paper from the segment pushed as wide as 10bp.

A Fitch report released yesterday that more defaults will occur did not help Chinese credits, although the ratings agency says these will be confined to smaller companies. One such company, Zhejiang Xingrun, is expected to default on a CNY3.5bn in bank and other debt.

Outstanding bonds from Chaori, Cifi and Wanda were some 5bp wider. The falls, however, would have been larger if not for some bargain-hunters, who moved in for opportunistic buying in property names. Wanda's 2018s and 2024s benefited from the bottom-fishing, being quoted at 410bp and 465bp, respectively, over US Treasuries.

Korean bonds were 2bp-3bp wider, as the weak sentiment spilled into that segment.

In contrast, Indian bonds were faring better, thanks to a report from S&P today, lauding their efforts to improve high financial leverages and strengthening their credit profile as a result.

A launch of IDBI's US dollar 5.5-year bond at a price of 370bp over US Treasuries had no impact on outstanding bonds, which tightened slightly. IDBI's outstanding 2018s were quoted at 290bp, while its January 2019s were at 325bp.

Indonesian paper continued to grind tighter about half a point today. "People are getting more comfortable with the sovereign, and the paper looks cheaper, than, say, Turkey," said one trader. "It is also a reflection of the movements in US Treasuries, which tightened 2bp yesterday."

However, trade volumes were lower than usual as several players were sidelined ahead of the US FOMC meeting due to be completed tonight in the US.

While cash bonds were weak, Asian credits were holding quite well. The IG index was quoted at 127bp/130bp, about 3bp tighter from yesterday. Indonesia's 5-year CDS move in nearly 6bp today to 171bp/178bp, while China's CDS bounced back 2bp tighter.

The end of the street protests in Thailand boosted the sovereign's CDS to 123bp/131bp, 4bp lower than yesterday.

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