August 12, 2015 / 9:23 AM / 2 years ago

ASIA CREDIT CLOSE: Credits continue to slide on China devaluation

HONG KONG, Aug 12 (IFR) - There was little today that could calm the sell-off in Asian credits, which continued to widen after the yuan fell further a day after Tuesday’s devaluation.

Liquid investment-grade credits were 5bp-10bp wider by Wednesday afternoon.

The long-end of the curve for benchmark names such as Cnooc, Sinopec and Korea Gas took a heavier hit than the shorter end of the curve, according to traders.

Indonesia’s 3.375% 2025s dropped almost a point to trade at 98.20 to yield 3.5%, while Chinese high-yield bonds such as Agile’s 2017s dropped a point to 99.70.

“The panic on FX is still settling in, and because the CNY is lower there is less of a reason for the US to hike rates,” said a Hong Kong-based trader. “With US yields coming down, credit gets less interesting.”

Yields on the 10-year US Treasury grinded in 9bp to 2.15% overnight, which was the lowest level reached since the end of May.

One area that was less affected was the Indian bank space, which was 5bp wider. One trader said he saw large bids for Axis Bank’s bonds at 100.70 this afternoon.

Concerns that a devalued yuan could drive a currency war also weighed down on demand for the region’s equities, which all traded lower.

China’s A-shares were more than 1% lower, while the Nikkei 25 closed down 1.6%. The Hang Seng was 2.4% lower at the time of writing.

Reporting By Frances Yoon; Editing by Vincent Baby

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