ASIA CREDIT CLOSE: Low-betas rally amid short squeeze and low liquidity

Mon Feb 17, 2014 4:39am EST

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HONG KONG, Feb 17 (IFR) - Low beta investment grade credits rallied today amid a short squeeze, according to traders. The move, however, happened in a day of very low liquidity.

"I think I did two trades today," said a trader with a major bank.

The lack of activity only helped exacerbate the moves, especially for Korean issues. The new 10-year bonds of Korea National Oil Corp tightened about 2bp to trade at 103bp/100bp, while the new 2019s tightened about 4bp and ended the Asian session quoted at 100bp mid-market.

Even the new 10-year bonds of Korea Gas managed to tighten about 1bp in the day to close at 109bp/106bp. Yet, the company underperformed its peers after it reported a net loss for 2013.

"With this credit, though, no one cares about its results, this is basically sovereign risk," said the trader.

A rally in the equity markets of the region also helped boost higher-beta credits. The new 2024s of the Republic of the Philippines ended the session up by 50 cents, quoted at 103.85 mid-market.

That sentiment ultimately helped the Asia ex-Japan iTraxx IG index grind a bit tighter and it closed quoted at 133bp/134bp, about 2bp tighter in the day and some 6bp-8bp tighter than where it was a week ago.

Christopher.Langner@thomsonreuters.com

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