SINGAPORE, Nov 29 (IFR) - Investment-grade and high-yield
credit rallied in tandem today as Asia rode the optimistic wave
started in the US overnight, where positive comments by a key
Republican lawmaker about averting the fiscal cliff brought New
York stock markets back to black toward the end of the session.
The giddiness in the West and the lack of negative headlines
on this side of the world buoyed the Hang Seng Index which saw a
1% gain today, its first this week.
Similar forces squeezed spreads for investment-grade
credits. Cash bonds were seen tightening 2bp-3bp in the day,
even as the yield on the 10-year US Treasury hardly moved since
Wednesday. CDS was also tighter and the Asia iTraxx IG Series 18
index was about 2bp narrower by the time London investors were
walking in, quoted at 112bp.
Most of the actual flow, however, was seen on the new bonds
issued by Mongolia. The 2018s ended the session quoted at 101.00
mid-market after having priced at 99.996 overnight, while the
2022s were quoted at 101.50 having priced at par.
The USD500m shorter tranche saw USD6bn in demand and the
USD1bn longer bond saw USD9bn in orders. This had some
speculating that part of the buying in Asia was driven by
underallocated institutional investors, even though some of the
buy-side here complained that the final pricing was too tight.
High-yield was high on the agenda overall, with plenty of
buying seen across the board. Retail investors were seen
favouring Chinese property credits, especially after Moody's
moved many of the bellwhethers in the sector to stable from
negative. Some of the benchmarks were up by as much as USD1.
This applied to Gemdale's recently issued bonds, which
closed the session at 104.00-105.00 and to Evergrande, which
ended at 108.00-109.00. Even beaten down Soho China got a boost
from the sudden interest in the sector, with its 2017s ending
the session some USD1 stronger in price terms at 98.00-99.00,
while the 2022s closed at 97.00/98.00.
On the flip-side, retail investors unloaded some of their
holdings of Olam bonds as the controversy with Muddy Waters
drags on. The 2017 dollar-denominated bonds ended the session
about USD1 weaker as a result of this selling, quoted at 95.00.
China Fishery's bonds also came under pressure after news
that the Russian government could bar its parent Pacific Andes
from procuring fish in the country. The bonds were already
weighed down by the company's worse than expected earnings
report earlier this month, and dropped some USD2 more last
quoted with a very wide bid-ask spread of 78.00-82.00.