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ASIA CREDIT CLOSE: Rising geopolitical risks dampen credit sentiment
April 12, 2017 / 8:40 AM / 8 months ago

ASIA CREDIT CLOSE: Rising geopolitical risks dampen credit sentiment

SINGAPORE, April 12 (IFR) - Asian credits widened in the morning on heightened geopolitical risks as North Korea threatened to fire a nuclear missile as the US boosts its military presence in the region.

The sour mood hit Bank of China’s bumper US dollar bond issue priced yesterday. The new 2022s and 2027s pushed out 3bp in the morning from reoffer spreads of 112.5bp and 135bp.

But the bonds recouped the losses by afternoon, returning to reoffer levels as China held emergency talks with the US to calm tensions.

Citic Securities’ 2020s and 2022s were similarly hit, widening slightly from reoffer spreads of 135bp and 150bp, respectively. The 2022s were quoted at 153bp/151bp.

“The sentiment is a touch softer, as it has been since the beginning of the week,” said one investment-grade trader.

“New bonds are not performing well. Going forward, the markets are going to be sensitive to headlines, particularly the geopolitical risks in Korea and Syria.”

Oil India’s 2027s were not spared with quotes at 177bp/175bp, more than 3bp wider from the reoffer spread of 172.5bp.

The heightened political risk did not affect Korea Expressway’s newly priced floating rate note much. The 2020 bond was surprisingly holding up at 70bp over three-month Libor, where the bonds were priced.

The iTraxx Asia IG index was broadly unchanged at 99bp/100bp. China’s 5-year CDS was about 4bp wider while South Korea’s default risks pushed out 2bp.

Reporting by Kit Yin Boey; Editing by Vincent Baby

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