ASIA CREDIT CLOSE-Kowepo, upgrade of the Philippines buoy market
SINGAPORE, Oct 3 (IFR) - Korea Western Power's well-sought deal yesterday and Moody's decision to promote the Republic of the Philippines to investment-grade status boosted Asian credit markets today. The upgrade means all three major rating agencies have the sovereign at IG status.
Investors were keenly buying paper, allowing desks to clear inventory. "I am some USD20m net sold today," said a trader in Singapore.
There was strong demand for most of the bonds with high correlation to Treasuries in the region. Hence, paper from both Korean and Chinese state-owned entities were some 2bp-3bp tighter in spread terms at the end of the day.
One trader said that the move was partly because there still were some shorts to cover. "Most of the paper in demand is repo material," he said, referring to bonds that are very liquid and hence easily borrowed for shorting.
However, another trader said demand was also due to clients taking on risk. There was interest especially for Korean names, in spite of the steady supply of new issues seen since late August.
The trader said that this was partly a result of high-quality buying of the new Kowepo 2018 bonds, which priced yesterday at T+165bp and wrapped the Asian session at T+161bp.
Moody's upgrade of the Philippines to Baa3, with a positive outlook, also helped investors feel good. The move had an immediate effect on the sovereign's bonds.
The 2037s traded as high as 109.50 shortly after the announcement, but retreated later amid some profit-taking to close at 108.90, some 25ct stronger on the day.
If trading of cash bonds was intense, the same did not apply to CDS. The Asia iTraxx IG index ended the day virtually unchanged at 149bp/153bp.
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