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ASIA CREDIT CLOSE: Remarkably resilient as Spain CDS gaps out
May 30, 2012 / 9:03 AM / 5 years ago

ASIA CREDIT CLOSE: Remarkably resilient as Spain CDS gaps out

SINGAPORE, May 30 (IFR) - Asia’s credit markets were remarkably resilient today, with no weakness emerging towards the close in the face of a 17bp gap up in five-year Spain CDS to 575bp/585bp at the Europe open. The Asia series 17 IG index remained at its opening 194bp/196bp level throughout the day, or 3bp wider from yesterday’s close.

Spain remains firmly in the spotlight, with Bankia’s bailout request falling flat and no formal eurozone rescue package via the FSS on the table.

While real money has remained sideliend for the past three weeks or so in Asia credit, there is also a deep fear of being short in any size, on risks of eurozone formal policy changes which might be of the game-changing variety. Nevertheless the risk of a liquidity crunch in the eurozone banking system seems to be rising every day.

The announcement by Hong Kong conglomerate Hutchison Whampoa of a two-part euro deal failed to impact the offshore Hutch curve, with the recently issued US dollar 2017s and 2022s - which have become pretty illiquid since launch a few months ago - last at Treasuries plus 215bp/205bp and plus 265bp/255bp respectively.

Each was issued at plus 275bp, and illustrates the secular spread tightening spread seen in Asian credit since the paper was launched. Hutch’s euro foray is being facilitated by a benign basis swap back to US dollars from euros and well as on the back of Hutch’s likely call that the euro will depreciate in the medium to long term.

The currency rout continues in Indonesia, despite the central bank’s introduction yesterday of short term US dollar time deposits in a bid to ease the shortage of dollars onshore in Indonesia.

Bank Indonesia claims that Indonesian banks have USD43bn of dollars deposited offshore, although an RBS report says that minus Indonesian banks’ foreign liabilities, their foreign asset position is negative to the tune of USD6bn.

Still, despite the ongoing rupiah weakness, Indonesia five-year CDS was reasonably stable today, adding 5bp to close out at 230bp/240bp. This is close to a recent spread high of 40bp to the Philippines’ five-year CDS, which was last 3bp wider at 193bp/198bp.

The Philippines was placed on positive outlook by Moody’s today, with its Ba2 rating equalized with S&P’s call on the country, which has it at BB positive.

Meanwhile cash trading was listless, with the only major highlight of week so far coming in the form of the recently issued Agile 2017s rallying up two points since the start of the week, and last at 97/98 or two points below reoffer.

jonathan.rogers@thomsonreuters.com

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