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ASIA CREDIT CLOSE: Bonds drift sideways ahead of Trump tax announcement
April 26, 2017 / 9:01 AM / 8 months ago

ASIA CREDIT CLOSE: Bonds drift sideways ahead of Trump tax announcement

SINGAPORE, April 26 (IFR) - The Asia ex-Japan iTraxx investment-grade index moved sideways, at 91.25bp/92.5bp, as investors awaited President Trump’s announcement on tax reforms, scheduled for today.

A fund strategist said that if Trump pushed through unfunded tax cuts, it was likely to drive up inflation and therefore bond yields, but noted this kind of measure was unlikely to be approved by hawkish US lawmakers.

“Trump has faced numerous reality checks to his policy measures,” said the fund strategist.

Korean sovereign five-year CDS was 1bp tighter at 53bp mid, having tightened from a 2017 high of 61bp on April 19, even though relations between the US and North Korea remain tense.

“The market is drifting,” said a credit trader. “Yields should be heading higher as equities get stronger.”

Bank of China’s 2022s were 4bp tighter, at Treasuries plus 108bp, and its 2027s compressed 5bp to a Treasury spread of 132bp. Oil India’s 10-year bonds also tightened 5bp to Treasuries plus 171bp.

In high yield, Gajah Tunggal’s 2018 bonds counter intuitively rose half a point to a cash price of 95.1 after S&P cut its rating on the Indonesian tyre-maker’s notes to CCC from CCC+.

S&P said the company faced rising refinancing risks on the notes due to mature in February 2018 and had not yet locked in funding, which raised the chances that it might be forced to carry out a distressed exchange for the bonds.

The bonds have gained six points this year, and were trading in the 70s in July last year.

1Malaysia Development’s 2023 bonds were seen steady at a cash price of 94/94.75 after it agreed a settlement with Abu Dhabi over a guarantee related to its 2022 bonds.

Reporting by Daniel Stanton; Editing by Vincent Baby

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