July 17, 2017 / 8:58 AM / in 6 months

ASIA CREDIT CLOSE: Weak US inflation outweighs strong China GDP

SINGAPORE, July 17 (IFR) - Weaker US inflation was a bigger driver for Asian markets today than stronger-than-expected China growth figures, meaning credit was generally firmer.

“Markets are reacting more to Treasuries than China GDP,” said a trader. “Treasuries opened higher so there has been some selling on that, but nothing out of the ordinary.”

Chinese GDP grew at 6.9% year-on-year in the second quarter, the same rate as the first quarter. This beat expectations of analysts, who had thought growth would slow slightly.

Industrial output rose 7.6% in June from a year ago, better than expected, and above the 6.5% annual increase seen in May.

The cost of Chinese sovereign 5-year CDS was unchanged at 65bp bid, having tightened around 7bp last week. The Asia ex-Japan iTraxx investment-grade index was flat at 84.5bp/85.5bp.

Indonesia’s new 2027 bonds were 1bp wider today and its 30-year 1bp tighter, but both were well inside last week’s reoffer yields, at 3.83% and 4.68%, respectively.

In high yield, China Evergrande’s 2025 bonds have recovered and were today wrapped around par, but the other tranches of its recent offering were under water. Its 2021 and 2023 bonds, both issued at par, were bid at 97.375 and 98.375, respectively.

Wanda International’s 2024 bonds dropped 3.5 points, after reports that Chinese authorities had clamped down on its lenders, while they scrutinised the company’s overseas acquisitions.

S&P today put Dalian Wanda Commercial Properties’ BBB- rating on review for possible downgrade, writing that the unexpected sale of some tourism and hotel assets last week could affect profitability.

Reporting by Daniel Stanton; Editing by Vincent Baby

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