SINGAPORE, Sept 23 (IFR) - Asian secondary credit had a
mixed day, with seasoned off-the run investment-grade bonds
well-bid and advancing around 25ct in price terms, while hedge
funds purchase single-name credit protection and the long end of
sovereign curves sold off.
This was expected to be one of the busiest days for new
issue announcements since May, but that failed to materialise,
as only one deal is live - for GS Caltex, which is lining up a
That issue will be an interesting test of how much investors
are willing to accept in terms of the new-issue premium. The
paper is guided at Treasuries plus 215bp, but widely expected to
be tightened in sharply ahead of pricing tonight in New York
"Too many people have been talking about crazy supply and
this has kept a lot of people on the sidelines as they wait for
it to emerge. Although the off-the-runs have done okay, real
money is waiting to get back into the market via new paper.
The problem is they want that paper to be cheap and I'm not
sure issuers are willing to pay up to meet those expectations,"
said a Singapore-based investment-grade debt trader.
He said that there were a lot of short duration and cash
positions established defensively in May, which would be looking
to extend up the curve or find a home in new issues. This may be
from a relatively short-time horizon perspective, rather than
based on a new assessment of the direction of long-end US
Interestingly, the sharp contractions seen last week in
single-name sovereign CDS have all but reversed with the
prevailing mood one of reality setting in after what many see as
an excessively euphoric reaction to the Fed's decision not to
So, while China and Korea 5-year CDS tightened around 7bp
each last Thursday, that has been retraced, back to 0bp/73bp and
Hedge funds have been buying protection on the view that
tapering concerns have not gone away and will simply re-emerge
in the run-up to next month's FOMC meeting.
The Indonesia 2043s and Philippines 2037s are each off
around 50ct to USD1, having been beneficiaries of the post-Fed
move last week, with fast money booking the fast profit made
over the past two trading sessions.
The Asia iTraxx IG Index is closing out at 145bp/147bp, or
2bp wider on the day, having added 1bp towards the close, in a
measure of the more sober market tone.