ASIA CREDIT CLOSE: Philippines 2024s rally; shorts run for cover

Fri Jan 10, 2014 4:06am EST

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SINGAPORE, Jan 10 (IFR) - The Republic of the Philippines gave the market a boost as its bonds rallied on the break and closed the session at 101.00/101.25 after being priced at par yesterday.

The 4.2% USD1.5bn offering was the first 10-year dollar bond to be issued by the sovereign since 2010 and its first offshore transaction as an investment-grade issuer.

The strong performance capped a week when some USD11bn was issued across both high-yield and investment-grade markets. The week included a USD4bn jumbo deal by the Republic of Indonesia and represented the equivalent of half of all the issuance logged in January last year.

"We have taken this amount pretty well and the market is holding even as four other issuers are on the road," noted one trader in Singapore.

As investors showed clear signs they can absorb the expected pipeline, investors that were shorting the market betting on deal fatigue started paring their bearish bets. The short-covering prompted a rally in some of the more liquid bonds.

The withdrawal of shorts hit Thai paper, which had been one of the favorite targets of bears recently. Most bonds from Thailand were 5bp/10bp tighter.

The 2017s of bellwether Siam Commercial Bank, which could not be sold at a spread of 262bp on Monday were being bid at a spread of 250bp or tighter on Friday.

Some of the Chinese bank paper, which was also under pressure earlier in the week, also was recovering earlier losses. The same was true for Indian financial institutions, although corporate paper was struggling to tighten because of the looming supply of an expected deal from ONGC Videsh next week.

Otherwise, yields on South Korean bonds were roughly 2bp tighter across the board. Kexim's new USD750m 2024s rallied further to end the week quoted at 101bp/100bp, having priced on Tuesday at 112.5bp.

The new issues of both Bank of Communications and Hongkong Land, however, were unchanged in the day.

Indonesia's new 2024s were quoted at 101.00/101.25 and the 2044s were at 101.15/101.25. Both were slightly stronger than yesterday in price terms, but were mostly tracking Treasuries.

On the high-yield side, the three Chinese property bonds priced earlier in the week remained stuck around the reoffer price.

One trader noted that while they were bid below par, those bids were not hit and offers above par were not finding buyers either.

"It is not like you can really sell below reoffer," he said.

The underperformer was the Asia ex-Japan iTraxx IG index, which closed the week at its widest for the period, around 139bp, as hedge funds continue to bet that credit will eventually follow the direction that equity markets in the region showed throughout the week.

Christopher.Langner@thomsonreuters.com

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