SINGAPORE, April 9 (IFR) - Cash bonds were under the spotlight today in the Asian credit markets, as strong bidding interest led to plenty of trading activity.
Asian credits have seen a turnaround in sentiment towards emerging markets over the past few weeks. The risk-on sentiment has driven rallies in EM stocks, as well as EM currencies.
In China, initial wariness over the mini stimulus programme announced last week has given way to more positive expectations, while a potential new government in India with more investor-friendly policies is drawing investors back.
“The market is very strong today,” said one Singapore-based trader, adding that investors had not expected the flow of new issues to be as small as it turned out. “So, they are underweight on duration, underweight on credit, and they are back in the market to pick up more exposure.”
Investors are also going further along on the duration curve for better-yielding investments. That provided a big boost to long-dated bonds, such as Indonesia’s outstanding 2044s, which were traded at 110bp over US Treasuries earlier today, well inside the reoffer spread of 296.2bp.
China’s BBB rated credits were narrowing 30bp-50bp in spreads, with similar movements in Indian credits and subordinated debt paper.
Oil India rode on a wave of renewed demand for Indian credits, which pushed India’s benchmark bonds to the tightest levels since June 2011.
Oil India’s newly priced 10-year bonds were rallying to 259bp, after they priced yesterday at 272.5bp, while the 2019s were firmer at 214bp, inside the reoffer spread of 222.2bp.
High-yield credits also benefited from the healthy bidding tone. Sri Lanka’s new bonds were indicated at 100.75 after they priced at par on April 7.
With investors fully focused on cash bonds, Asian credit spreads were thinly traded. The iTraxx IG index moved a mere 1bp tighter to 121bp/123bp.