March 11, 2015 / 8:55 AM / 4 years ago

ASIA CREDIT CLOSE: Petronas curve holds steady as EM bonds weaken

SINGAPORE, March 11 (IFR) - Malaysian energy giant Petronas Corp dominated attention today with its four-tranche bond and sukuk offering, which is expected to be USD6bn-7bn in size.

“If Petronas can get this deal out of the door, it will be risk on for Asia,” said one credit trader. “That’s not a given, thanks to the size and the weak oil price.”

Petronas’s old bonds were little changed, despite the new supply. The 2019s were at Treasuries plus 115bp/122bp, around 2bp wider, while the 2022s were at T+135bp/140bp. The new bonds offer around a 5bp concession to the curve, according to a bond investor. However, many investors are underweight Malaysia, and a new issue of benchmark bonds gives them a quick way to balance their portfolios.

Investors said that the new Petronas bonds seemed expensive compared to the curve, but cheap in comparison to CNOOC’s 2018s, for example, which were quoted today at a Z spread of 77bp/86bp. Petronas used to trade inside CNOOC.

The Asian investment grade iTraxx index was 3bp-4bp wider, at around 110bp, with Chinese state-owned enterprises looking weak. They were around 5bp-8bp wider, with most of the action concentrated around the 10-year tenor.

Indonesian and Philippine 5-year CDS bore the brunt of weaker sentiment towards emerging markets. They were 10bp and 11bp wider today, respectively, at 162bp/167bp and 94bp/98bp.

High yield was generally half a point to 1.5 points lower today, with oil and gas names down 1 point and Chinese property credits a quarter to half a point lower

daniel.stanton@thomsonreuters.com

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