ASIA CREDIT CLOSE: Asian credits move sideways in limited trade

Thu Aug 14, 2014 5:27am EDT

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SINGAPORE, Aug 14 (IFR) - Asian credits saw range-bound trading today in slightly weaker markets as investors sought clear directions after gloomy data releases out of China, Japan, the UK and the US.

Germany added to the gloom this morning, announcing that its economy contracted 0.2% in the second quarter, while France said its economy had stagnated.

"Markets will remain volatile and face some headwinds, especially related to geopolitical issues," said a high-yield trader.

Trade volumes were back to normal following three days of rebounds from a sell-off late last week. The iTraxx Asia IG Index was broadly unchanged at 104bp/106bp, though 5bp tighter from a week ago.

Market tone was slightly softer as some profit-taking crept in to replace the bout of buying. Investment-grade cash bonds were about 1bp wider, but CCB Asia's newly minted Tier 2 bonds tightened 1bp-2bp from a reoffer spread of 275bp over US Treasuries.

"The bonds have performed against my expectations," said one Singapore-based trader. "There is going to be lots of supply in Chinese bank subordinated paper, so I thought the bonds would underperform."

China industrial credits were holding up well. Shanghi Electric tightened sharply to quotes of 121bp today, against the reoffer spread of 140bp, while Sinopec's 2024s were seen at 139bp/134bp.

Kexim's newly priced bonds were still wide to reoffer spreads, with the 2019s seen at 78bp/76bp, above reoffer of 72.5bp, and the 2026s were at 96bp/94bp versus reoffer of 85bp.

In the high-yield sector, Cogard 2021s were quoted at 99.125/99.625, while Greenko 2019s were under water at 98.25/99.25.

Kityin.boey@thomsonreuters.com

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