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ASIA CREDIT CLOSE: New issues gain amid tighter spreads
September 4, 2014 / 9:03 AM / 3 years ago

ASIA CREDIT CLOSE: New issues gain amid tighter spreads

SINGAPORE, Sep 4 (IFR) - Newly priced issues firmed in secondary trading today as investors embraced risk despite a bearish tone in regional equity markets.

Stocks in Japan and Australia ended 0.3% and 0.4% lower while Hong Kong stocks were ending slightly down. China stocks were rising 0.8%, supported by a strong bid for property shares after the government relaxed rules to allow listed developers to sell medium-term notes.

With no bearish headlines, Asian credit spreads pulled in sharply by 2bp to 89bp/91bp. Spreads have narrowed 7bp throughout the week.

The positive sentiment spilled into cash bonds, with much attention focused on issues sold this week.

Spreads on the newest bond, Industrial and Commercial Bank of China (Macau)’s Basel III-compliant Tier 2 issue narrowed 10bp to 215bp over US Treasuries from a reoffer spread of 225bp.

Haitong International’s new 2019 bond, also sold yesterday with a spread of 255bp, traded as tight as 241bp this morning before settling at 245bp/244bp in the afternoon.

“There are plenty of supplies expected in the pipeline so you would expect some pressure on pricing, but all the new bonds offered little new issue concession or priced inside their curve, and despite all that, they are all doing well,” said one Singapore-based trader.

“That shows that there is just so much liquidity in the market that technicals are overweighing fundamentals.”

A case in hand was Korea Development Bank’s new 5.5-year bond, which two days ago priced inside its own yield curve at a spread of 82.5bp. The bonds widened as much as 8bp yesterday, but bounced back today to 86bp/83bp.

“It’s just so tightly priced when it should be 10bp wider on a fair value basis,” said the trader.

Other new issues were holding up. Indonesia’s 2024 sukuk continued to find bidding interest with the bonds quoted at 100.75, up from yesterday’s 100.50 levels.

China Taiping’s perpetual bonds were still hovering around yesterday’s levels of 101.00 although there is little two-way flow in the paper.

kityin.boey@thomsonreuters.com

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