February 10, 2014 / 9:32 AM / 4 years ago

ASIA CREDIT CLOSE: Short-covering tightens market

SINGAPORE, Feb 10 (IFR) - Asian credit markets tightened slightly today as investors covered shorts amid better sentiment towards credit, following a weaker-than-expected US nonfarm payroll number on Friday.

The US Labor Department reported that day that 113,000 jobs had been created, while the median forecast among economists Reuter surveyed had projected 185,000 new jobs. As a result, the US Treasury yield dropped 1bp during the US session.

Today, Asian bonds not only caught up, they even outperformed the benchmark. As a result, bonds like Indonesia’s 2044s were 35 cents to 50 cents higher in price terms, last quoted at 102.75 mid-market.

The new bonds of Korea Gas and Korea Midland Power, which were among the most active in trading, ended the day unchanged at mid-market spreads of 120bp and 128bp, respectively.

Credit default swaps also moved and China’s five-year protection, which was offered on Friday at around 94bp, was last bid at 91bp. This had an impact on the Asia ex-Japan IG iTraxx index, which closed the session about 1bp tighter, quoted at 144bp/1446bp.

A new dollar sukuk bond offering from Export-Import Bank of Malaysia, rated A3/A-, was offered at 165bp over US Treasuries, a level that looked tight at first glance, but, which traders said, was more than enough to attract interest.

The 2017 bonds of Maybank and Mexim were being quoted at 180bp and 190bp, respectively.

“But you can bid 175bp and you still will not find anyone willing to sell these bonds,” said one trader. “There is none of this high-quality financial paper to be found easily,” he added, suggesting the deal would see strong demand, in spite of being offered through the implied curve.

On the flip-side, bankers saw the new five-year bonds of Agile Property Holdings as cheap. Yet, despite what considered a large new issue concession, there was little impact on other high-yield property bonds, which did not weaken in price on the back of the new deal.


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