SINGAPORE, Dec 15 - Asian credits were generally wider following the overnight surge in US Treasury yields. The strong reaction to the Federal Reserve’s indication that it could raise rates up to three times next year was a surprise, considering that the likes of BlackRock had already factored in similar expectations.
Low liquidity at the year-end exacerbated some moves, and the Asia ex-Japan iTraxx investment grade CDS index widened 5bp to 123bp/125bp.
Five-year sovereign bond yields for Indonesia and Sri Lanka widened 17bp and 12bp, respectively, but the yield on June 2021 bonds from China Development Bank, a proxy for the sovereign, tightened 6bp. Malaysian sovereign 5-year CDS was 4bp wider at 145bp bid.
DBS’ US dollar AT1 notes were unchanged at a cash price of 96.4 to yield 4.5%, or 258bp over Treasuries, after Moody’s cut the subordinated debt ratings of Singapore’s biggest banks by one notch. UOB’s US dollar Tier 2 issue callable in March 2022 was also unchanged, at Treasuries plus 169bp, while OCBC’s Tier 2 bonds due 2022 were flat at Treasuries plus 163bp.
In high yield, Country Garden’s December 2026s were flat at 100.25 to yield 5.6%. Among recent local government funding vehicle issues, unrated Chengdu Xingcheng Investment Group’s 2021s fell a point to 96.4 and BBB- Changsha Pilot Investment Holdings Group’s 2019s dropped three-quarters of a point to 97.7.
(Reporting by Daniel Stanton; Editing by Vincent Baby)