SINGAPORE, March 3 (IFR) - Activity in Asia’s credit markets ground to a halt as investors became wary of the developments in the Ukraine and focused on safe haven investments.
Dealer screens reported only two investment-grade trades all day, according to one trader. Although more trades may have been executed directly by various desks, the lack of electronic trading was a good barometer of how little activity was in the market.
The two trades reported, though, both resulted in wider spreads.
“There is some profit-taking, for sure,” said the trader. “Investment-grade prices are higher because Treasuries rallied, so some people are selling and stepping aside so they can come back in once the volatility settles down.”
Even with few actual trades to report, most desks were marking their bonds lower and spreads wider. The most affected bonds were those from high-beta sovereigns such as Indonesia, which saw its 2044s drop about 75 cents.
The only bonds in the region holding up unchanged were those from South Korea, reflecting the country’s safe haven status. In spite of the selling, the trader said that the region was holding up well compared to the rest of the world.
“Lately, every tick of stocks in the US or any news from Eastern Europe is sending everyone running for cover,” he said.
Indeed, the Asia ex-Japan IG iTraxx index was only 2bp wider in the day quoted at 134bp/137bp. The strength of the CDS index was mostly attributed to a steady performance by the five-year protection of China, which remained mostly unchanged.
The trader said that was partly because the index will roll-over on March 20, so many accounts have been selling CDS to be able to buy the new series.