January 28, 2014 / 9:37 AM / 4 years ago

ASIA CREDIT CLOSE: Bonds rebound as liquidity dries up

SINGAPORE, Jan 28 (IFR) - Bond markets in Asia rebounded today after the selloffs in the past three sessions. Still, bond buyers were mostly looking for short-term high-quality names, indicating that they remain in defensive mode, even if a bit more upbeat today than as recently as yesterday.

The Asia ex-Japan iTraxx IG Index tightened to 150bp from the 157bp close yesterday. The 5-year CDs of China, for instance, also rallied to 93bp/92bp from a wide of 97bp yesterday. Recent investment-grade issues, such as China Overseas Grand Oceans’ 5-year paper, were also 3bp-4bp tighter.

However, investors were asking more about the 5-year bonds from Hong Kong and China IG names last year and the year earlier, which, therefore, mature in 2017 and 2018.

Those bonds, which are already hard to find at other times, were nowhere to be seen and, as such, their spreads tightened as much as 6bp in some cases.

Indian bank paper also rebounded in response to a rate hike in the country. The new Bank of Baroda 2019s were last quoted at 30bp/325bp, 3bp tighter on the day. Again, though, the 5-year bonds issued last year and in 2012 were in higher demand and tightened some 5bp-6bp.

Part of the reason for the sharp move in IG bonds was a 2bp rise in the yield of the 10-year US Treasury as investors pared their bearish bets.

Even IG property names, which had been among the worst beaten, benefited from the better tone and Wanda’s new 2024 bonds, which had traded as wide as 480bp, retreated to 457bp today, still wide to the 455bp reoffer spread, though.

Liquidity, however, has thin and, as investors seek bonds already hard to find on busy days, actual market activity had become scarce. This is also a factor of the nearing Lunar New Year holiday, which will see a good part of the Asian investor base close shop from tomorrow afternoon.

Christopher.Langner@thomsonreuters.com

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