ASIA CREDIT CLOSE: US Fed boosts confidence among Asian buyers

Fri Jun 20, 2014 4:58am EDT

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HONG KONG, June 20 (IFR) - Asian credit extended their robust performance after the US Federal Reserve's policy statement assured financial markets this week that interest rates would remain near zero.

The Asia ex-Japan IG iTraxx Index was last quoted at 100bp, trading near a 52-week low of 97.5bp reached on June 9.

Krung Thai Bank's new USD700m Tier 2 bond had tightened 13bp this morning to 340bp over from a re-offer spread of 353bp, shrugging off political uncertainty.

Meanwhile, China Hongqiao Group's USD400m offering, which tightened 50bp from initial guidance to price at a 7.625% yield, was cited at a cash price of 102, a sign that investors were becoming increasingly comfortable with high-yield Chinese credits.

Philippine and Indonesian sovereign bonds also gained 1-2 points from their recent lows after the Fed statement said US unemployment remained elevated, while inflation was still running below target, suggesting that rates would remain lower for longer.

Yields on 10-year US Treasuries had rallied 5bp to 2.61% after the Fed announcement on Wednesday, but surrendered 3bp the next day.

A majority of Fed officials projected that rates would begin to rise next year, with the median estimate for rates to be 1.125% at the end of 2015, according to projections submitted for the meeting.

The Fed pushed ahead with plans to wind down quantitative easing, reducing monthly purchases to USD35bn beginning July from USD45bn.

frances.yoon@thomsonreuters.com

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