ASIA CREDIT CLOSE: CDS recoup yesterday's losses despite US shutdown
SINGAPORE, Oct 1 (IFR) - Asian credit default swaps tightened about 2bp to 154bp/156bp today in a market that was dead quiet as Singapore traders took a breather with Hong Kong and China out of action for National Day holidays.
The compression in spreads looked defiant in the face of the US government moving towards a partial shutdown, announced in mid-afternoon, but it was in fact a technical rebound from an overdone weakness seen yesterday.
"Asian markets panicked yesterday, and that looked excessive when European govvies were flat and US credit spreads were broadly unchanged," said one credit analyst. The iTraxx IG index was 8bp wider at the close yesterday.
While some market players believe that the US shutdown will not lead to any sell-off, others think that the Asian credits will start pricing it in the coming weeks.
The heavy pipeline is also likely to adversely affect spread performance. September saw USD13.4bn issued in Asia, bringing year to date issuance to USD98bn, USD20bn short of last year's record.
With much of Asia out, and with the all-important US non-farm payroll numbers looming on Friday, traders and investors were basically sitting on their hands. No trades or quotes were going through the computers, leaving cash bonds flat.
Expectations are for the primary markets to come to a halt for the rest of the week in view of the US government shutdown and the NFP figures.
"It'll be a brave soul to stick their neck out, this is no time for any issuer to try a launch," said the analyst.
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