SINGAPORE, April 25 (IFR) - The drivers of Asian credit
markets today were again new issues. Investors were selling some
seasoned bonds from Chinese state-owned entities to make room in
their portfolios for new issues from that sector. Yet, the new
issues seemed to generate enough buying interest that it spilled
over to the secondary market.
Institutional investors were said to be picking up the 2040s
of Sinochem as they saw better value in senior long-dated bonds
than in new subordinated perpetual notes.
"They are senior and offer similar yields to those on offer
from the hybrids," noted a trader. This propped up the bonds,
which were last quoted at 210bp/200bp, 5bp tighter on the day.
The bid side level for the bonds, indeed, translates to a
yield of 5% for a bond that is senior and has a fixed maturity.
Meanwhile, Sinochem has just revised the guidance on its
perpetual junior bonds with interest deferral option to 5.125%
The new subordinated bonds have a 25bp step-up at year 10.5
and another 75bp hike in year 25.5. Hence, the company only has
a strong incentive to call the bonds in 2038. Given the
seniority and similar effective tenor, smart money was buying
the 2040s instead.
Overall, though, the investment-grade market was having a
good day with better buying across the board. The Asia ex-Japan
iTraxx IG Series 19 was being wrapped at 111bp/112bp, some 2bp
tighter in the day.
Single B bonds from China, however, paused after a weeklong
rally as investors started to take profits on heady gains. Some
names still managed to eke out a final 25-ct gain in price, but
most property names dropped a bit. Still, the return they gave
investors in the past week is impressive.
Sunac 2017s, for instance, closed the session at 106.00,
having traded yesterday at 106.50 after gaining USD4 in price
since last week.
CIFI Holdings 2018s also lost a bit, closing at 104.00, but
still over USD2.5 higher in the week. "It was a technical
squeeze, some people got caught on the wrong side of this trade
and had to cover shorts," said one trader, noting that the
movement had finally subsided.