Morning Commentary: Rally in rates leaves Asian bonds firm; new issues get attention

By Christine Van Dusen

Atlanta, May 13 – Core rates rallied on Wednesday morning and Asian bonds remained firm, with high-grade emerging market notes closing unchanged to 2 basis points tighter amid healthy client demand and particular interest in long-dated paper.

Most of the focus was on new issues, including China-based Huawei Technologies Co. Ltd.’s 4 1/8% notes due 2025 that priced at 99.06 to yield Treasuries plus 195 bps.

The notes started Wednesday morning at 178 bps, then traded near 180 bps before closing the Asian session at 180 bps bid, 178 bps offered.

ANZ, Bank of China (Hong Kong), DBS Bank, ING and Standard Chartered Bank were the bookrunners for the Regulation S deal.

China General Nuclear Power Corp.’s new 4¼% notes due 2025 priced at a spread of 177.5 bps and closed at 176 bps bid, 173 bps offered.

“Good Asian retail demand,” a London-based trader said.

China Petroleum & Chemical Corp. (Sinopec Group) saw its 2½% notes due 2020 – which priced at 99.576 to yield Treasuries plus 125 bps – traded at 112 bps.

And Cnooc Ltd.’s 2 5/8% notes due 2020 that priced at 99.716 to yield Treasuries plus 128 bps moved to 122 bps.

“Financials were broadly unchanged,” the trader said. “Korea was a touch firmer.”

Among high-yield Asian bonds, property company notes were broadly unchanged, he said.

China-based Agile Property Holdings Ltd.’s new 9% notes due 2020, which came to the market on Tuesday at 99.507 to yield 9 1/8%, traded between 99 3/8 and 99¾, then moved to 99.80 before closing at 99¾ bid, par offered.

Among sovereigns, long-end bonds from Indonesia were up 5/8-point after trading at a high of par, then moved to 99.50 bid, 99.875 offered, another trader said.

“The 2025s are performing well at 100.375 bid, 100.625 offered,” he said. “The 2024s are heavy, and traded at 113 today, up a ¼-point only, and look like value. But demand for higher-cash priced bonds [is] waning. Dealers in Asia clearly are just using this minor bounce to sell bonds.”

Bonds from the Philippines were slightly firmer, with the curve flattening, driven by strength in the long end, he said.

“The 2040s spent all day up 1 1/8 at 103.5 bid, 103.75 offered,” he said. “Some buying of 2025s earlier, but in general customers are favoring the lower-cash prices and more recent issues.”

Tuesday’s orderly flow “makes me think we may see some risk-on in London open,” another London-based trader said. “Still light on the primary supply in Central and emerging Europe, the Middle East and Africa.”

© 2015 Prospect News.
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