August 22, 2017 / 8:33 AM / 10 months ago

ASIA CREDIT CLOSE: China IG firmer on MoF speculation

HONG KONG, Aug 22 (IFR) - Asian credit markets were stable on Tuesday as some China investment-grade names rallied amid speculation that the country’s expected US$2bn sovereign bond sale, planned later this year, would be tightly priced.

A Hong Kong-based credit trader noted that core Chinese investment-grade names were about 1.5bp tighter today after tightening by 2bp on Monday.

He said interest was fuelled by expectation that quasi-sovereign Chinese names would stand to benefit from tightly priced China sovereign US dollar bonds.

In June, China’s Ministry of Finance announced that it would issue US$2bn of sovereign bonds in the second half. It did not disclose the tenor or yields at the time.

“The rumor has it that MoF’s US$ bonds would be priced at a very tight spread over US Treasuries and that would help boost valuations of quasi-sovereign Chinese names such as State Grid or Sinopec,” said the trader.

A paper published late last week by Bank of China, Hong Kong branch, put fair value for 10-year China sovereign US dollar notes at 40bp over US Treasuries on massive demand from Chinese accounts.

Investors are also watching closely China Great Wall Asset Management’s US dollar offering due to roll out later this week. The issue size of the multi-tranche offering is expected to be US$1.5bn-$2bn, according to investors.

The iTraxx Asia IG index tightened marginally to 81/82. State Grid Corp of China’s 5.350% 2018s were bid at 100.54 in cash price. China Great Wall Asset’s 2.625% 2021s were bid at 98.14 in cash price.

Reporting by Ina Zhou; Editing by Vincent Baby

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