HONG KONG, Oct 4 (IFR) - Asian credit spreads continued to
grind tighter on the back of strong technicals despite investors
turning slightly more cautious ahead of central bank meetings in
Europe and Japan.
The iTraxx investment grade index series 18 for Asia
ex-Japan pushed in to 129/131bp from Wednesday's 131/133bp, with
cash bonds outperforming CDS marginally with no major supplies
in store after a recent spike.
That suited IRFC fine as its newly sold bonds performed
strongly in their secondary debut. The 2017s tightened 13bp to
267bp over US Treasuries after pricing at 280bp, as investors
still saw the investment grade quasi-sovereign offering
relatively high yield.
Indeed, recently minted Indian bonds are well sought after
as investors are also bidding up Exim Bank India's 2017s to
around 260bp and State Bank of India to around 296/286bp.
"Primary markets are repricing secondary levels these days
in certain segments, as poor liquidity means price discovery is
getting complicated in secondary - especially for segments where
there has been substantial positive news flow," said Krishna
Hegde, a strategist with Barclays.
"When you get new deals, you get pure price discovery
because of a more broadbased participation compared with
secondary. As a result, primary markets become a better way to
discover the right clearing price."
Secondary markets are witnessing a slight paper squeeze
despite the record issuance this year as money continues to pour
into higher-yielding, emerging markets in a low rate
This is helping recent laggards catch up as the technical
bid keeps getting stronger, unless it gets derailed by two
factors - the European tail risk, which has not gone away
completely, or a supply deluge.
Maybank 2022s are trading at 275bp, still wide after a 260bp
print but rebounded from a toppish 300bp just a week ago.
Siam Commercial Bank 2017s, which were reopened last month
at 215bp, are now trading tighter at 213bp from last week's wide
PTT Global Chemicals 2022s have performed well, now at 227bp
after pricing at 260bp in mid-September. It was trading at
around 235bp last week.
The front-end of the Korean and Indian space has
outperformed in recent weeks as scarce supply and demand for
short-dated paper pushed down yields.
Hana 2015s, KEB 2015s and Woori 2015s have tightened 10-15bp
and bonds from IOC and Bank of India 2015s moved in by about
25bp in the past two weeks.
"Its a sweet spot for banks which are flushed with money.
Rates are on hold for longer so any spread is a real pick-up for
them," said one trader who added there was very little supply in
the 3-year maturity bracket this year, after relatively low
volumes in late-2009 and early-2010.
"All that is combining to drive demand for the front-end
paper," he said.
The paper chase is making pricing conditions even more
difficult in the high yield sector, where a lack of quality
supply is pushing investors to push yields further down in the
"There is a lot of money and not many assets to buy - just a
grab for yield," said a Hong Kong-based chief trader at a
"It is a heavily bifurcated market - stuff that is unloved
remains unloved and higher quality paper is literally impossible
Among benchmark names, Longfor 2016s are trading at
109.875/110.875 while Agile 2017s are at 105.75/106.75.
Reflecting the strength of the technical bid, Guangzhou 2016s
are now trading at 104.125/104.875, compared with its August
reoffer of 97.061.
The technical support is pushing up some recently beaten
down names, with Winsway 2016s catching bids at 76.5/78 from
yesterday's 70/72, as some short-covering and retail interest
Another bond that saw short-covering was Bumi 2017s which is
are now trading at 80/81.75, steady from overnight levels and
much higher than last week's low of 78/79, as investors await
the next move from the debt-laden cash strapped company.
Fund injection via asset sales and expectations of
improvement in coal prices are being cited as reasons behind