November 20, 2017 / 7:54 AM / a year ago

ASIA CREDIT CLOSE: Asian credits see thin flows in soft markets

SINGAPORE, Nov 20 (IFR) - Asian credit markets were lacklustre as risk-averse sentiment prevailed after coalition talks failed in Germany, putting Angela Merkel’s fourth term as chancellor in doubt.

“The market is dead quiet and the tone is slightly weaker because of the Merkel uncertainties,” said a trader.

“But the softness in the markets isn’t as bad as seen in the last couple of weeks; I think that has stabilised towards the end of last week.”

The past week saw an outflow of funds from global bond markets, causing a sell-off especially in Asian high-yield credits.

Global high-yield bond funds saw the biggest weekly outflow in over three years during the past week, according to data from EPFR Global, while emerging markets bond funds saw an 11-week inflow streak come to an end.

EPFR said investors bailed out of funds dedicated to riskier asset classes such as junk bonds, emerging markets local currency debt and bank loans.

Flows in the secondary markets were also thin due to a hectic primary pipeline with at least five live deals in the Reg S market, with a handful of mandates announced to keep the rest of the week busy.

Recently priced transactions were either treading water or hovering at par. Jianyin’s 3% 2022s were seen at 102bp/100bp over US Treasuries against reoffer at 97.5bp, while the 3.5% 2027s were at 129bp/127bp after widening from 125bp.

Bank of China’s 2022 FRNs were around reoffer at par, as were Wing Lung’s Tier 2 notes which were indicated at 99.8/100.00.

Asian credits were flat with the iTraxx Asia ex-Japan IG index indicated at 78.7/79.5bp.

Reporting by Kit Yin Boey; Editing by Vincent Baby

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