ASIA CREDIT CLOSE: CNOOC's offering lifts the market

Fri Sep 27, 2013 5:28am EDT

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SINGAPORE, Sept 27 (IFR) - Asian credit markets ended the week on a bullish note, helped by the strong performance of new bonds issued by CNOOC.

The Chinese oil company issued a 10-year dollar bond and a seven-year euro-denominated bond on Thursday.

CNOOC's dollar bond was the first that featured a full guarantee from China and therefore was the first to be eligible for listing in the Emerging Market Bond Index.

This drew strong demand for the USD1.3bn dollar bond, which allowed the company to sell it at 185bp over US Treasuries, 25bp tighter than initial guidance of 210bp. The bonds also rallied in the secondary market and were last traded around 171bp.

"CNOOC seems to have breathed new life into the new issues," said one trader in Singapore.

As a result most of the issues that priced this week were being quoted 1bp-2bp tighter in the day. China General Nuclear Power's USD500m 2018s, which priced Thursday at 220bp, were being quoted at 216bp/214bp.

Both bonds saw plenty of two-way flow, which kept investment-grade traders busy throughout the session. Real money investors were the biggest buyers, as they chased the two index-eligible bonds in the secondary market to ensure they met their benchmark requirements.

Otherwise, dealers continued to add CDS exposure as they bet on tighter spreads ahead. The Asia ex-Japan iTraxx IG Series 20 index also closed the session 2bp tighter at 148bp.

On the high-yield side, there was little activity. "It was very quiet, a typical Friday ahead of [the National Day] holidays in China," said a high-yield trader in Singapore.

One of the few bonds that saw activity was the new Country Garden bond due 2021, which recovered some recent losses and was last quoted at 99.50/99.75. The offering had been bid as low as 99.25 on Thursday after being priced at par. Most of the demand they were seeing, though, was from retail accounts buying in small clips.

Christopher.Langner@thomsonreuters.com

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