February 5, 2018 / 8:00 AM / in 4 months

ASIA CREDIT CLOSE: Credit slides, primary freezes on US yield surge

SINGAPORE, Feb 5 (IFR) - Asian primary issuance in dollars screeched to a halt again and bond yields widened in secondary trading, in response to Friday’s sharp moves in US Treasuries.

Treasury yields spiked after the release of better-than-expected non-farm payrolls, adding to the 40bp widening of 10-year Treasuries last month.

“Friday was a little bit of an over-reaction, but I don’t think it’s going to retrace overnight,” said a DCM banker.

Asian credit was softer across the board, but investors were not panicking, as many decided not to sell at current levels.

“Credit has backed up, but it hasn’t gone to pieces,” said a credit trader, who noted that bid-ask spreads were particularly wide, with little real liquidity in the market.

Chinese sovereign five-year CDS was around 5bp wider at 60bp. The iTraxx Asia ex-Japan investment-grade CDS index was 3bp wider at 68bp/69bp.

BoCom Leasing’s bonds widened 1bp-4bp across the curve to 10 years. China Cinda Asset Management’s 2048 bonds were just 4bp wider, at Treasuries plus 212bp. Its 2023, 2025 and 2028 bonds were flat.

Alibaba’s 2027 bonds widened 5bp to Treasuries plus 109bp, after the company said it would buy 33% of Ant Financial in a non-cash deal, terminating an existing profit-sharing agreement.

Longfor Properties’ 2023 bonds spiked 4bp before settling at Treasuries plus 159bp, around 2bp wider than Friday. Its 2028 bonds widened 3bp to Treasuries plus 197bp.

Asian high-yield bonds were seen around a point to 1.5 points lower at the long end of the curve.

Tata Steel’s 2023 and 2028 bonds dropped half a point and 1.3 points to cash prices of 98.5 and 96.3, respectively.

Medco Energi’s 2025 bonds, which had been 10x subscribed during bookbuilding last month, dropped three-quarters of a point to 98.5.

Reporting by Daniel Stanton; Editing by Dharsan Singh

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