ASIA CREDIT CLOSE: Philippines jumps on upgrade; China SOEs widen

Last Updated: Thu, May 02, 2013 19:26 hrs

SINGAPORE, May 2 (IFR) - The long-end of bonds from the Republic of Philippines jumped in secondary after Standard and Poor's moved the sovereign up to investment-grade status.

The upgrade, the second from the three major agencies, makes the bonds of the sovereign eligible for three of Barclays IG indices, which are used as the benchmark for a total of almost USD62trn in assets under management.

While the sovereign will have a very small weighting in the indices, the sheer potential demand was enough for fast money to jump on the bonds.

"You would expect people to have already discounted the second upgrade, but it seems like they hadn't," said one trader in Singapore.

The long-end outperformed as investors sought more convex bonds that should do better as the technical bid for the sovereign kicks in. The 2030s, 2032s and 2034s all traded up 75ct to USD1 closing with bids at 172.85, 136.65 and 140.85, respectively.

Meanwhile, Indonesia saw the outlook on its BBB- rating from S&P moved to stable from positive. As accounts focused on the Philippines, however, there was little movement on the bonds of Indonesia, which ended the day unchanged.

Elsewhere, the recently issued bonds from Chinese state-owned entities, such as Sinopec and CNPC, all widened 1bp-2bp on the back of the jumbo 4-tranche deal from CNOOC, which could reach a total amount of USD4bn.

In spite of the price pressure, traders said there was not a lot of selling of the bonds as investors were expecting CNOOC to come out with a jumbo to fund the refinancing of the acquisition of Nexen.

"Everyone is waiting for the price revision before positioning themselves," said one trader. The issue is that, if CNOOC tightens guidance, it may not widen the secondary levels of its peers.

Otherwise, high-yield saw a few scrappy trades, with demand seen especially for the bonds with higher coupons, such as the 2018s of Glorious Properties and Greentown, which both ended roughly 25ct higher in price terms.

Bonds offering higher carries had been in demand by private banking and retail accounts as they put cash to work, traders said.

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