Lanka’s Bond add to new issues rally on pent up demand

SINGAPORE (IFR):  There was a broad-based relief rally in Asia credit markets in the morning session on the back of the European Union debt crisis solutions proposed at yesterday’s summit.

The pent up demand which has been building on the back of a dearth of new issue supply and widespread risk aversion emerged most clearly in the performance of recent new issuance, with strong rallies seen in this week’s deals for KHFC, Sri Lanka and Zijin Mining. DCM bankers are now speculating that an agreement to raise the US debt ceiling will provide another leg up which might in turn get the conventional Asia primary pipeline moving again.

The iTraxx IG index put on its biggest tightening in over three months, pulling in 5bp to 114.5bp/115.5bp with the sovX in by 3bp to 116bp/119bp.

Liquid Asian CDS pulled in by between 1bp to 4bp. Leading the way were Korea at 100bp/103bp and the Philippines at 133bp/136bp, both in by 4bp.

Thailand was at 119bp/124bp and Malaysia at 93bp/96bp, each 3bp tighter. China and Hutch were 1bp tighter at 87bp/89bp and 90bp/93bp respectively.

On the recent new issue front, the KHFC 2016s rallied in 6bp to Treasuries plus 207bp bid, versus its Monday reoffer of plus 218bp. Meanwhile the new 2021s from Sri Lanka were bid at 101.8 from a par reoffer while the Ziljin Mining tap pulled in to a plus 260bp bid from a 280bp reoffer.

In the China property space, prices were up between an eighth to a quarter, with the bellwether Cogard 2018s up a quarter to 103 bid. China industrials were up by the same margin with the Lonking 2016s up a quarter to 100.5 bid and the Fosun 2016s up an eighth at 99 bid. The offshore Philippines curve was around an eighth weaker at the long end, with the 2026s marked down to 104.875 bid. The long end of the Indonesia curve was unchanged, with the Indo 2021s bid at 103.5.