ASIA CREDIT CLOSE: Investors bottom-fish after New Year

Last Updated: Thu, Feb 14, 2013 09:20 hrs

SINGAPORE, Feb 14 (IFR) - Despite ongoing thin liquidity Asian credit markets had a more positive trading session today, with bargain hunters picking up scraps of high-yield and long duration paper.

Meanwhile high-grade has performed decently, albeit in the context of rising Treasury yields, with the Asia IG space roughly 5bp tighter since last Friday.

CDS is back to relatively normal liquidity with the IG iTraxx index last at 110bp/112bp, for an unchanged level coming up to the close.

Buying was reported in the perp sector by Singapore traders, with the Reliance perp up a point at 98.5 bid and the Petron perp bid up at 103 from its par reoffer just over a fortnight ago. The Cheung Kong perp remains mired at the 92 level.

Regional DCM players continue to confront the "great rotation" out of fixed income and into equity and are mindful of the fund flow dynamic which saw USD25bn of inflows into equity funds in January versus USD8bn into emerging market fixed income funds.

Equally they are keeping a close eye on Treasury yields, with high convexity paper looking an increasingly risky proposition down at tight Treasury spreads and in a rising yield environment.

As an example of this risk, the Triple A rated Temasek 30-year is down at an 89.5 bid despite having performed decently in spread terms down to Treasuries plus 75bp, thanks to the soft US Treasury price action.

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