ASIA CREDIT CLOSE: Indonesia sells off on poor trade and inflation data
SINGAPORE, Sept 2 (IFR) - Asian credit was solid in the face of a mini Treasury sell-off that saw the 10-year yield rise around 7bp. The Treasury price action was based on scaled back expectations of military intervention in Syria as President Obama is set to put the missile strike plan to the vote in Congress.
Meanwhile, stronger sets of European and China economic data are bringing the global economic normalisation argument to the fore and, with it, chances of the Fed tapering QE this month. Despite the Treasury move, the Asia iTraxx IG index is looking to close out 3bp tighter at 158bp/161bp.
Today's US labour day holiday has crimped activity, with a more normal trading pattern expected to return tomorrow, when a traditionally busy September gets under way.
The day's worst performer was the Indonesia sovereign curve, where the long end was off around a point on the back of poor trade data, with the country clocking up a record USD2.31bn deficit in July.
Added to this was the highest inflation rate since January 2009, with prices rising 8.79% in August. The worst-hit part of the Indonesia curve was the 10-year point, which was off around two points, with the 2023s last bid at 92.5.
A Singapore-based trader said the market was pricing in 10-year issuance from the sovereign as it lined up a sukuk issue, something which might prompt Indonesia to issue at a shorter tenor.
Meanwhile, there has been some nibbling at the India complex out to five years although prices are broadly unchanged as are most Korean counters, with the trader noting that real money buyers are waiting for new issuance to book rather than stepping into the seasoned market.
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