SINGAPORE, April 22 (IFR) - The market was focused again on new issues with Indian corporate issuers returning to the spotlight after Union Bank of India announced a new 5.5-year Reg S bond at 315bp over US Treasuries.
This time, however, accounts were taking the opportunity to sell some of the bonds that had rallied the most. The bonds of Bharat Petroleum and Power Grid Corp, for instance, were seeing better sellers.
However, as some institutional accounts were underweight on India and are now starting to add the country to their portfolios after an improvement in current account numbers, the sellers found buyers and Bharat Petroleum 2022s, for instance, ended unchanged at 235bp/230bp. Yet, the pressure was there.
"India's corporate spread curve is one of the flattest in the region, it makes sense to sell the long end there," said one credit analyst.
Accounts were also taking profit on some of the high-yield bonds that rallied the most in the past twelve months. Country Garden 2015s, for instance, saw some selling and finished the day some 25ct lower in price terms at 112.00/112.75.
Meanwhile, the new bonds in the high-yield space were getting a boost from a rally in the 5- and 10-year bonds sold on Friday by unrated China Minmetals Land. The USD125m 2023s, which were issued at par to yield 6.5%, were wrapping up the day at 103.00, while the new 2018s, sold at par to yield 5.5%, traded as high as 104.00.
"(It was) near impossible to find any bonds, there is no executable level," noted a sell-side analyst. He suggested there could have been a bit of a short-squeeze, given that the transaction did not seem well supported initially last week and it did not include high-yield covenants, in spite of its sub-investment-grade rating.
Hence, it would make sense that some accounts shorted it. However, the transaction ultimately found a lot of support and that turned the trade against shorters. Plus, the smaller size that resulted from dividing the deal in two tranches meant that repo desks had none of it to lend so any naked shorters had to resort to the market to cover their bets.
Aside from the new issues, though, the market was pretty much unchanged. The Asia iTraxx IG Series 19 index, for instance, ended at the same level where it closed on Friday, at 112bp/114bp.