February 21, 2018 / 8:17 AM / 9 months ago

ASIA CREDIT CLOSE-Traders cover shorts before Chinese money returns

SINGAPORE, Feb 21 (IFR) - Asian credit was rangebound with a bias towards tightening, as traders moved carefully ahead of Chinese investors’ return from the week-long Lunar New Year holiday tomorrow.

“There is a bit of bottom-picking going on,” said a credit trader. “People are going in, trying to cover shorts before the Chinese come back.

We are off the wides, and people are waiting for the Chinese to put money to work and see what new issues come out.”

CDS had underperformed cash bonds in recent weeks, but has recovered lately, with the iTraxx Asia ex-Japan investment-grade CDS index seen half a basis point tighter at 69bp/70bp, from a recent high of 78bp mid on February 9.

Since February 9, Indonesian sovereign five-year CDS has improved to 88bp today, from 97bp, and the Republic of Korea’s cost of five-year protection was quoted at 52bp, from 57bp.

“Nobody wants to buy CDS at highs,” said the trader. “It widened out before, but whenever market stability returns it comes back.”

China Cinda Asset Management’s recent bonds were unchanged across the curve, with the five, seven, 10 and 30-year notes bid at Treasuries plus 143bp, 178bp, 203bp and 209bp, respectively.

Other recent investment-grade issues from Daegu Bank and Yes Bank were seen at Treasuries plus 135bp and 130bp, respectively, both unchanged today.

In high yield, HNA Group’s bonds due December 2018 were bid at a cash price of 96.4, yielding 13.1%, off a low of 90.9 on January 22. Golden Energy and Resources’ 2023 bonds were flat at 98.25, yielding 9.4%. (Reporting by Daniel Stanton)

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