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SINGAPORE, Sept 30 (IFR) - The threat of a US Government shutdown over the debt ceiling and the collapse of the Italian Government coalition did some damage to Asian credit at the opening this morning, pushing out the iTraxx IG Index 8bp to 156bp/158bp.
Still, a Singapore-based trader observed that there had been no panic buying of protection at the wider levels and that many fast money players had used the opportunity to unwind shorts. The Asia sovereign complex was around 5bp wider at the open and failed to bounce.
However the trader said that, at the wider levels seen on some IG names with the recently issued CNOOC 2023s were 10bp wider at the open, while the Bangkok Bank 2018s were 8bp wider and the Korea Hydro 3bp wider, he was lifted in size to be net short.
He said that he believed a lot of traders and fast-money investors were using the early sell-off to cover longer term shorts, although that had no major impact on spreads, which were looking to close out the day in soggy fashion.
With China and Hong Kong out tomorrow, it is unlikely that any new issuance will be announced and all eyes will be on October getting into full swing, with Friday the first day of proper trading when China gets back from the National Day holidays.
"It will be a good breathing space during which the market can absorb the recent round heavy supply. I expect volatility to remain reasonably high as the debt ceiling debacle gathers pace and the uncertainty in Italy brings back the issue of the fiscal shortfall.
However, with so much new paper flying around, this looks like a market you'd be more inclined to go short of," said the trader.
Friday';s 5-year issuance from Yuzhou Properties managed to escape the mini carnage of this morning and was holding in at its par reoffer bid.