ASIA CREDIT CLOSE: Markets bullish on eurozone hopes and FOMC

SINGAPORE, June 20 (IFR) - Asian credit markets had a solid day, with many players now of the view that Europe is about to get ahead on the policy curve rather than being perennially behind.

So Spanish yields are opening at sub 7% levels and there is a view that European policymakers including the notoriously intransigent Angela Merkel are about to "throw the kitchen sink" at the eurozone crisis, in the words of a regional DCM head, which would comprise bailouts for both Spain and Italy.

Mounting pressure on Merkel from the other members of G20 plus from as far afield as Asia and Latam is likely to produce a bailout in the form of EFSF funds, according to the DCM head.

The iTraxx series 17 IG index has held onto its opening level to close out 5bp better on the day at 174bp/176bp.

Meanwhile the upbeat tone has also been supported by expectations of a continuation of Operation Twist from the FOMC tonight or perhaps a clearer signal that there is room for QE3.

Recent new issuance continues to perform, with the KEB 2017s closing out at Treasuries plus 241bp, or 2bp tighter from this morning's open, while the Hang Lung 2022s are also in 2bp from the open at plus 321bp. The Tingyi 2017s are flat on the day at plus 300bp, while the Swire Properties 2022s are 1bp on the day at plus 263bp.

The Indonesian high-yield sector had a constructive day and was up between an eighth to half a point, with the Aerospace Satellite 2015s powering up 1.75 points. China property was around a quarter to three quarters better, with the KWG 17s outperforming and gaining a point to a 98.75 bid, as did the Powerlong 2015s to an 85 bid.

Renhe was once again the underperformer as market players call into question its basic business model in the face of falling cash balances. The Renhe 15s and 16s fell a point each to a 56 bid. Also trailing the sector upswing were the SPG Land 2016s which shed a point to 76 bid.

In the China industrial space the Hidili 2015s powered up three points to a 77 bid, outperforming the sector, which added between a quarter to three quarters of a point.

jonathan.rogers@thomsonreuters.com