ASIA CREDIT CLOSE: Market grinds tighter without snapping
SINGAPORE, Oct 17 (IFR) - Asian credit markets ground tighter today, but did not stage a massive relief rally as some had expected.
One strategist said much of the potential gains from a US debt-ceiling agreement in Congress had been priced into bonds over the past few days. "Because the market was already quite firm, it is not snapping, it is just grinding," he said.
Still, the excitement over the end of the US Government shutdown helped the Asia ex-Japan iTraxx IG Index end the day 3bp tighter at 133bp/135bp.
That was 4bp wide to the first prints of the day at 129bp/131bp, as investors started the session by adding risk after the US Senate reached an agreement to raise the debt ceiling. The bill was then sent to the House of Representatives, which also passed it.
The good news, however, also prompted some profit-taking among accounts that had been adding risk, betting on a resolution in time to avert a US default. Hence, those cashing in capped the market gains.
"There was good two-way flow with some chasing the market to add risk, while others were taking profit as the bonds shot-up," said a trader in Singapore.
Investment-grade was more active with plenty of Chinese bonds changing hands and the higher-quality more liquid bonds from the country ending the day some 5bp tighter on average.
Still, Indian corporate issuers outperformed and Canara Bank's new 2018s closed the session quoted at 355bp, 10bp tighter in the day and 30bp inside the 385bp reoffer spread achieved last Thursday.
The move boosted other credits from the subcontinent with the likes of ONGC 2018s also tightening some 10bp to end the day quoted at 250bp over Treasuries.
Even high yield got a boost with the bonds that have a higher correlation to Treasuries benefiting the most. Country Garden's 2023s, for instance, ended the day about 50 cents stronger in price terms last quoted at 93.25/93.75.
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