ASIA CREDIT CLOSE: Credit tightens even as stocks decline

Fri Mar 1, 2013 4:38am EST

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SINGAPORE, March 1 (IFR) - Asian credit markets ended flat to tighter today as the Hang Seng index closed down 0.61% after a negative session in Wall Street. The trading performance was similar to earlier in the week when markets in Europe tumbled but credit in Asia remained steady, as investors continue to put money to work in the secondary amid a dearth of primary issuance.

The Asia ex-Japan iTraxx IG 18 index ended today quoted at 108.00 mid-market, virtually unchanged for the week. While the European CDS indices moved as much as 40bp at times, the Asian index remained stuck in the 107bp-110bp range (for a graphic of the Asia itraxx index please click here reut.rs/YDyWCe ).

"We were really range-bound the whole week," said one trader in Singapore.

Philippine CDS ended the week quoted at 98bp/100bp, in line with where it started, having widened only marginally on Tuesday on the back of the results of the Italian election. Indonesia ended a little bit wider at 135bp/140bp, and its spread to the Philippines opened 5bp. But that was simply a result of the announcement that the sovereign had mandated banks and will do a two-tranche transaction soon.

"Actually, it did not even get whacked as much as you would have thought given that Indonesia and Pertamina both mandated," said another trader in Singapore, referring to news today that the state-owned oil company had picked Barclays, Citigroup and Royal Bank of Scotland to lead a dollar deal.

Pertamina's 2042 bonds fell some 35ct in price terms, but that was marginal considering the prospects for significant new volume. In fact, supply - or lack of supply - was the overriding theme last week. As investors realised there would be few new deals, they put money to work in secondary.

According to traders, both real money and private banking accounts bought throughout the week. This also buoyed the few new issues that did price. Glorious Property ended the day around 101.00, after pricing at par earlier in the week. Bank of Communications' 10-year bond end the week at 184bp/183bp, after pricing at 190bp.

HDFC closed at 225bp, 2bp wider than yesterday but still tighter than the reoffer spread of 230bp. The Indian lender saw intense trading activity as investors were understood to be shorting the bond to reflect negative views on the Indian economy after yesterday's budget announcement. However, there was enough buying interest to hold the bond inside the reoffer spread. Other Indian names widened some 3bp-4bp as investors reacted to the headlines out of New Delhi.

christopher.langner@thomsonreuters.com

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