SINGAPORE, Jan 31 (IFR) - Asian credit markets closed an
ebullient month of January on a sour note, with investment-grade
spreads widening by 6bp-8bp and recent perpetual bonds testing
new lows. The Asia ex-Japan iTraxx IG index closed quoted at
116bp/117bp, 8bp wide to yesterday, marking one of the sharpest
moves of the index in the past month.
Some of the benchmarks that comprise the index saw even
sharper moves, with Indonesian 5-year CDS wrapping 11bp wider at
145bp/151bp and Philippines protection some 7bp wider at
The move in the spreads of the sovereigns was more intense
with most of Indonesia's curve ending some 10bp-15bp wider and
Philippines widening some 10bp as well. The fact that spreads
underperformed CDS suggests the move wider was driven by selling
of bonds instead of dealer positioning on the credits.
Indeed, one trader said that accounts were showing concerns
about the future direction of the market after yesterday's
negative GDP print in the United States and were lightening
their bond holdings ahead of the Chinese New Year lull.
"People were not even bothering to window-dress, they were
just selling," said a trader in Singapore, referring to the
common practice that some funds have of adding the best
performing bonds to their portfolios toward the end of the month
known as window-dressing.
As selling goes, perpetual bonds were the favourite target
after the new fixed for life perp by Reliance weighed on that
asset-class. All of the perps in the market suffered multi-point
losses in the morning, with Agile touching lows of 90.00 and
Reliance printing as low as 94.00. The brand new Petron also
lost some USD4 in price on the break.
Petron, however, found retail support at 96.00, in spite of
75% of the deal having been allocated to private-banking
accounts anyway. Traders also saw leads trying to squeeze naked
shorts placed on the bond by a handful of fast money accounts.
The strategy seems to have worked to some extent and Petron's
new perp was closing the session quoted at 100.25, 25ct above
The Petron move also pulled up the other perps bringing
Agile to 91.50/93.50 and Reliance to 96.50 at the close. The
perps continue to be, though, the bond dealers love to hate and
traders said there were still enough shorts in place to keep the
weight on them.