SINGAPORE, May 27 (IFR) - Asian credit markets were closing the day tighter as dealers and hedge funds bid up prices in a bid to log in some gains before the summer doldrums bring trading to a halt.
“There was buying across the board this morning, but it was mostly dealers and hedge funds trying to catch the momentum,” said a trader in Singapore.
Another trader said that real money was also getting involved, though, as funds tried to square up positions that they could retain for the summer. He expects a lot of position jockeying until the meeting of the European Central Bank and US non-farm payrolls for May next week.
“Memorial Day in the US yesterday already marked the beginning of the holiday season there and, with the World Cup coming in early June, the attention of European and Asian investors will be diverted. So, no one expects much trading in the second half of June and in July,” he said.
As a result, he said: “Funds are trying to find positions that they can square off for the next couple of months, they do not want to be too long or too short anything.”
Amid expectations that the ECB could announce additional monetary stimulus next week, the other trader said he saw a lot of buying in the morning as fast money tried to take advantage of the positioning of real money.
That pushed up the more depressed recent issues, with the 5-year and the 10-year bonds of Cinda Asset Management tightening 10bp in the morning.
Other bonds from Chinese state-owned entities tightened as much as 5bp. High-yield bonds rose 25-50 cents across the board on the back of the same movement.
Fast money, however, was already taking profit and some of the best performers of the day gave back some of the gains towards the end of the session. The more liquid 10-year bonds of Chinese state-owned entities, for instance, were ending the day only 2bp to 3bp tighter.
The Asia ex-Japan iTraxx IG index was also quoted only 1.5bp tighter at the end of the Asian, having been more than 2bp tighter earlier in the day.