ASIA CREDIT CLOSE: Strong secondary, slow primary baffles analysts
SINGAPORE, Oct 21 (IFR) - Asian credit markets resumed a rally that started early last week ahead of an agreement to end the government shutdown in the US, with traders reporting strong demand for cash bonds across the board.
In fact, the market was so strong this morning that many bankers had predicted a busy day in primary activity, with as many as four deals expected to cross the screens.
That did not materialise, though, and only SK Broadband announced 5-year bond with price talk at 200bp over US Treasuries.
"I was expecting a busy day and I can't really tell why it was not," said one portfolio manager in Singapore. Still, he suspected issuers could be getting greedy and waiting for the rally to go a bit further to get even tighter rates.
"Issuers have their own considerations," said one banker, suggesting the portfolio manager could be right. "However, as rates are low again, credit spreads are tightening and there is demand, anybody that can should go out now," she said.
Indeed, investment-grade bonds were closing the session about 3bp tighter on average in spread terms.
The Asia ex-Japan IG iTraxx Index ended the day 1bp wider at 130bp/132bp, suggesting that the move in bonds was a reflection of strong investor demand to add risk as dealers and fast money tend to be the more active players in the CDS market.
High yield was also seeing a lot of demand with most sub-investment-grade bonds ending the session 25 cents to 50 cents higher in price terms.
The outperformers were the 2018s of Glorious Property Holdings, which ended the day at 92.00/93.00, about USD1.5 higher.
Curiously, the move came about on news that trading in the company's shares had been halted on the Stock Exchange of Hong Kong as the controlling shareholder Zhang Zhi Rong was about to announce a bid to take the company private.
"It is almost as if bond investors were celebrating that they will have less disclosure," joked one analyst. Investors, however, seem to have read into the move that Zhang will take the reins of the company and turnaround its lacklustre sales performance, bidding up the bonds.
On the other side of the spectrum, Bumi's 2017s were back down after gaining for most of last week on news that debt owed to the China Investment Corporation had been converted to equity. The bonds closed the day quoted at 62.00/64.00, having closed at 64.00/66.00 on Friday.
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