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ASIA CREDIT CLOSE: Philippines upgrade by Moody's lifts sovereign's cash curve
October 29, 2012 / 9:16 AM / 5 years ago

ASIA CREDIT CLOSE: Philippines upgrade by Moody's lifts sovereign's cash curve

HONG KONG, October 29 (IFR) - The main event of the Asian trading day was Moody’s upgrading the Republic of the Philippines to one notch below investment grade at Ba1. The news pushed up the sovereign’s offshore dollar bonds by between 25 cents and 50 cents and pulled in the Philippines’ CDS by 3bp-5bp.

The agency cited the country’s rising growth, low inflation, appreciating currency and growing foreign exchange reserves as the reason for its action.

The move had long been anticipated by market players, which explains the relatively muted price action, although it paves the way for the attainment of full IG status and will certainly add to the allure of Philippines’ debt, which has always carried rarity value given the relative lack of issuance from the country in relation to its Asian EM peers.

Bonds issued earlier in the year by Yanzhou Coal took another hit after the company failed to meet earnings estimates.

The company’s due 2017s and due 2022s are each off around USD2 and USD3 dollars versus last Thursday’s levels.

Meanwhile the China property sector has shown signs of weakness as it contemplates absorbing new issue supply from Soho China, with the China property cash complex about 50 cents to USD1 weaker across the curve.

The iTraxx series 18 IG index is 5bp wider on the day, having opened 4bp softer, and is closing out at 123bp/125bp. Cash is broadly speaking around 3bp-5bp wider, with a regional syndicate banker suggesting that after the recent powerful tightening, there was a recalibration of spreads underway, although in the absence of widespread selling from real money or retail.

All in all it was an illiquid trading day, with the underwhelming US GDP data released last Friday failing to make a major impact on sentiment and all eyes now on Friday’s NFP data for setting the short term tone.

jonathan.rogers@thomsonreuters.com

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