ASIA CREDIT CLOSE-Hedge funds seek protection, institutional investors buy bonds

Mon Jan 6, 2014 4:05am EST

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SINGAPORE, Jan 6 (IFR) - The first trading session of the year to see primary activity is closing with institutional investors and hedge funds seeing things differently.

Fast money was reported to be buying CDS today, especially those related China and Thailand, to take advantage of upcoming supply from the former and talk of a downgrade for the latter.

Meanwhile, institutional accounts were buying cash bonds, betting on tighter spreads as they returned to their desks to find the yield on the 10-year US Treasury 11bp higher than it was right before Christmas.

As a result, the Asia ex-Japan iTraxx IG Index was closing the session quoted at 134bp, or 3bp wider on the day. That move was attributable mostly to a similar widening in the 5-year CDS of both Thailand and China.

On the flip side, traders reported that spreads on cash bonds were v2bp tighter on average.

"I only got lifted today," said one trader, indicating his offers went to investors in a sign of strong demand for bonds. There were buyers of Korean paper, despite widespread expectations that the KDB could tap the market this week and be followed closely with the likes of Kexim, KNOC and Korgas.

Although the activity was setting a trend, traders reported very little actual trading. "Most accounts were busy with the new issues," said another trader.

There were three live deals in the market today, all in the high-yield segment. Chinese property companies R&F Properties and Kaisa Property Holdings were both in the market, as was Sri Lanka with a new 5-year dollar benchmark. Christopher.Langner@thomsonreuters.com

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