ASIA CREDIT CLOSE: Short covering boosts short-end high-yield

Last Updated: Sun, Feb 17, 2013 06:51 hrs

SINGAPORE, Feb 15 (IFR) - There were sporadic bouts of buying in Asian credit, both on the back of short covering and bargain hunting, although for the most part the market retained its illiquid holiday mode.

The bargain hunting was focused on the shorter end of the high-yield curve, with dates below 2015 lifted in scrappy size.

The Shui On and Evergrande 2015s were each up a half to 106 and 108 respectively with the low duration of the short date and relatively high cash price appealing to investors increasingly looking to reduce rate risk exposure.

Meanwhile the battered up recently issued perp sector also caught the short covering tailwind, with the Reliance perps up at 98 bid, the Cheung Kongs at 93.5 and the Petrons solid at 103. The Street is short inventory according to a Singapore-based trader, who sees more room for price gains as the short squeeze continues.

Investment grade was muted, although the trader saw room for further spread tightening against a backdrop of low funding rates. The JACI investment grade index is at the 210bp mark, still some way off the 2010 tight of 170bp, and against a rising yield trend in the Treasury market the spread tightening dynamic could have legs.

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