HONG KONG, March 7 (IFR) - Higher demand for Chinese paper gave Asian credit markets a small but positive boost on Friday, yet markets remained cautious ahead of US payroll data that will be released later this evening.
The Asia ex-Japan IG iTraxx Index tightened about 2bp to 123bp/125bp as of 0500GMT from yesterday’s close of 125bp/127bp, as some buyers tiptoed into Chinese bonds.
Sentiment towards Chinese paper improved as the yuan rose against the dollar for the fourth straight session. The People’s Bank of China fixed the official midpoint 0.08 higher today at 6.1201.
CNOOC’s and Sinopec’s 2023s tightened 4bp-5bp, moving in tandem with its peers on the stock index. PetroChina and Sinopec outperformed the broader Hong Kong and China stock benchmarks on bets that both will benefit from policy reforms at the ongoing National People’s Congress.
China property names also rode the wave of better demand as investors picked up bonds that have been underperforming recently. The Wanda 2024s tightened 4bp while spreads on CHIOLI’s 2023s tightened 5bp.
“Accounts are taking advantage of US Treasury levels amid a lack of supply. Dealers are light on inventory,” according to a Singapore-based trader. “We’re also seeing the demand coming as a new Chinese SOE is on the road.”
Beijing Infrastructure Investment has mandated Royal Bank of Scotland and Wing Lung Bank as joint global co-coordinators for fixed-income investor meetings that will kick off on Monday.
Meanwhile, Indonesia’s sovereign was a quarter of a point weaker in price as investors took profits amid a recent rally, according to another Hong Kong-based trader.
Speculation that Indonesia’s macroeconomic picture will continue to improve gave the country’s property developers a boost, with the Lippo Karawaci and Alam Sutera 2020s up half a point higher in price.
Flippers and retail demand kept CCB Asia’s 3.25% 2016s and China Eastern Airlines’s 4.8% 2017s, both new Dim Sum bonds, at their reoffer price.
China CDS tightened 1bp to 85bp.
The US will report nonfarm payrolls at 8:30am EST Friday. Economists surveyed by Reuters expect payrolls increased by 149,000 last month, and that the unemployment rate will remain at a five-year low of 6.6%.
After averaging about 205,000 per month for the most part of 2013, nonfarm payrolls dipped to just about 94,000 in December when an unseasonably cold and snowy winter slowed economic activity in the US.
Yet dealers say the markets won’t react much even if payroll data is lower than expected.
“The overall weakness will probably be eschewed by the weather again, but we won’t see an aggressive move as most will point to bad weather,” said another Singapore-based trader. “Right now the markets are fairly risk-on.”