ASIA CREDIT CLOSE: Tapering talk keeps pressure on credits
HONG KONG, Aug 20 (IFR) - Asian credit spreads widened today as the market continued to price in speculation that the US Federal Reserve may reduce monetary stimulus as early as next month. Traders were looking to the Fed's minutes due for release tomorrow for more clues.
"There is still selling across the board, maybe some selective buying in Chinese SOEs, but pretty much bid-side inquiry," said a Singapore-based trader.
Indian credits continued to underperform and spreads were 25bp-30bp wider on the day as the rupee plunged 1.6% to 64.13, adding to the 2.3% drop yesterday. Bank of India 18s were at Treasuries plus 470bp/440bp, ICICI Bank and State Bank of India's 2018s were at Treasuries plus 440bp/420bp.
Levels have started to look compelling to some though. "I am buying Indian bank paper at these levels and advising some clients also to do the same because I think the selling on account of stimulus tapering is fully factored in at these levels," said a Hong Kong-based trader.
Yet, for today, the widening continued. The 5-year CDS spreads on State Bank of India, which is seen as a proxy for the sovereign, was at 355bp/400bp and was the underperformer of the day followed by Indonesia's 5-year protection, which was at 280bp/303bp.
The Asia ex-Japan iTraxx IG index widened to 155bp-160bp from yesterday's 145bp/150bp.
Elsewhere, Chinese and Hong Kong investment-grade names were 2bp-8bp wider, Malaysian credits were also 6bp-15bp wider on the day.
On the high-yield side, long-dated Chinese property papers were USD1-USD1.5 lower and, in the five-year segment, double B names were 75ct to USD1 down in price terms.
High-yield bonds from Indonesia also saw selling pressure with Gajah Tunggal's 2018s down USD3 and Bumi Resources bonds off USD2 on the day, a trader said.
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