September 5, 2014 / 9:16 AM / in 3 years

ASIA CREDIT CLOSE: ECB buoys credit mood, but investors eye payrolls

HONG KONG, Sep 5 (IFR) - Asian credit spreads tightened on Friday after additional stimulus announced by the European Central Bank overnight strengthened global risk appetite.

The Asia ex-Japan IG iTraxx index was last cited 2bp tighter to 90bp after the ECB cut all three of its rates and pledged an asset-backed security and covered bonds purchasing programme.

China investment-grade spreads tightened as much as 5bp, while the country’s high-yield names also continued to tighten even as some investors had feared that the summer rally would start to unwind.

Meanwhile, 10-year US Treasury yields rose 4bp to 2.45%.

“You can’t fight the central bank,” according to a Singapore-based trader. “The bears keep losing.”

The trader added that the constructive backdrop drove an increase in demand from real-money investors, particularly from insurers.

New issues such as West China Cement USD400m 5-year non-call 3 6.5% traded near reoffer levels.

One trader warned that the ECB boost for Asian credits could subside after the US announces nonfarm payrolls data today, with economists projecting that payrolls rose 225,000 last month. That would be the seventh straight month that employment expanded above 200,000 jobs.

“There is concern that better data could drive Treasury yields higher,” he said. “Investors are anecdotally positioned for that. But I could also see a weaker number driving the 10-year yield to 2.3%, which will be positive for credit.”

frances.yoon@thomsonreuters.com

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