HONG KONG, August 8 (IFR) - Investors unnerved by
geopolitical tensions prompted a broad sell-off in Asian
investment-grade and high-yield bonds today.
The Asia ex-Japan IG iTraxx index widened about 4bp to 115bp
on Friday, its highest level since May.
The worries stemmed from US President Barack Obama
approval's of air strikes in Iraq to protect American personnel
from Islamist militants and from reports that no solution was in
sight for Ukraine as Russia troops massed on the border, Yields
on 10-year US Treasuries tightened 6bp overnight.
"Usually Asian credit spreads don't keep up and widen faster
when we see a dynamic rally in US Treasuries," according to a
credit analyst based in Singapore.
"We did have some froth in the markets so it's good to shake
out weaker hands. Sentiment was better in the afternoon."
Traders saw both real buying and short covering towards late
Friday afternoon, but bonds from Chinese state-owned enterprises
have widened 30bp since the beginning of the week.
Investment-grade bonds such as CNOOC and Sinopec's liquid
2024s were trading wider at 160bp/158bp levels, while spreads on
Korean bonds also moved out as much as 7bp. Indian IG spreads
Jittery sentiment forced USD770m worth of emerging
market-dedicated bond funds to exit in the week to August 6,
ending six straight weeks of inflows that were driven by hard
currency bond investments, according to data from EPFR Global
and Barclays Research.
This is the first week in four of hard currency bond fund
outflows, reflecting a similar direction in the US high-yield
Meanwhile, Japan's benchmark Nikkei 225 dropped 454 points
to close under the 15,000 level. Hong Kong, Taiwan and Korea
also closed in the red.
Debt syndicate bankers said issuers have been delaying bond
sales this week because of the unsettled credit markets, but
they will be watching closely for a positive turn.