HONG KONG, Aug 27 (IFR) - Asian credit spreads widened today as risk sentiment weakened against a backdrop of geopolitical tension brewing between the US and Syria, but volumes were thin and bottom fishing by retail investors supported some credits.
“It’s relatively quiet, but we are not out of the woods yet,” said a Singapore-based trader. The iTraxx Asia IG index was set to close at around 162bp from yesterday’s 157bp/159bp.
CDS spreads were wider as a sell-off in local equity markets prompted traders to buy protection. Indonesia’s 5-year CDS spreads widened to 280bp.
However, new issues from Korea kept outperforming the broader market. SK Innovation 2018s were tighter at T+185bp/181bp after pricing at T+230bp in early August. KoFC 2018s were at 138bp/135bp after printing at T+145bp on August 15.
Traders said liquidity around the new issues and the fact that these were trading wider than the others among the Korean credits were supporting demand there.
Bonds from Chinese investment-grade property names like Poly Real Estate and Vanke were actively traded and were down 4bp and 3bp at T+339bp/335bp and T+280bp/278bp, respectively.
Sovereign cash bonds like Indonesia 23 and 43s were also weaker on account of higher US Treasury yields and were down 50ct to USD1 in price terms, while Philippine bonds were 25ct to a 50ct lower. Volumes here were thin, though.
Indian bank paper also continued to find support among retail investors. “In India, retail investors are interested in buying 17s or 18s bank bonds, but selectively into better names like Bank of India, State Bank of India or Export-import bank of India. They couldn’t care less about the others,” the trader said.
Chinese property high-yield names were also had solid support from the strong retail bid. Evergrande’s 2014s, 2015s and 2016s were up 20ct, USD1.13 and 38ct, respectively.
Traders said that the market would track treasury yields and equities in the near term and liquidity would remain thin until summer holidays were over. So, trading is expected to remain range-bound.