ASIA CREDIT CLOSE: Region catches up as bond spreads widen

Last Updated: Tue, Feb 04, 2014 09:10 hrs

SINGAPORE, Feb 4 (IFR) - Asian credit markets caught up today with the sell-off that began in the rest of the world since before the Lunar New Year holiday.

Asian markets have been closed since Thursday afternoon, a period when the yield on the 10-year US Treasury note dropped almost 10bp and the Dow Jones Industrial Average fell 2.3%.

"There was quite a bit of catch-up to be done in the market," said one trader in Singapore.

Bond spreads were 5bp to 15bp wider this morning as soon, as traders started circulating quotes, and they remained there for most of the day. Korean bonds continued to show resilience, with spreads only some 5bp wider on average. The same applied to India, surprisingly.

The more liquid bonds from Chinese state-owned entities were among the worst hit, with some trading with spreads as much as 15bp wider in the day. The least affected ones were at least 5bp wider as well.

The only securities to benefit from the move were the prices of the recently issued bonds of Indonesia and Philippines, which were some 25 cents stronger on average. They still did not fully replicate the rally in the price of the US benchmark.

In spite of the sharp moves, though, traders said there was hardly any volume. Most of the changes happened only on paper, as traders bid lower attempting to protect their books.

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