HONG KONG: Sentiment in Asian credit improved today amid rallies in equities in the region, but Dim Sum bonds took a heavy hit from an offshore renminbi liquidity squeeze.
"US dollar credits tightened in general with investors buying long-dated bonds. Signs of renminbi stabilisation and a stock rally have helped turn around sentiment," said a Hong Kong-based credit trader.
Most Asian stocks rose today as investors took a positive cue from better-than-expected China export data, though mainland stocks fell with the Shanghai Composite Index closing down 2.4%.
The iTraxx Asia ex-Japan index was 2bp tighter at 146bp/148bp. Swire Properties' 2026 US$ bonds, printed last week at a yield of 3.665%, were quoted at 3.64%/3.61%.
However, Dim Sum bonds have taken the worst hit since the surprise devaluation of the Chinese currency last August as the People's Bank of China is said to have drained liquidity in the market to support offshore renminbi.
Overnight Hibor hit a record high of 66.81% on Tuesday before falling to 8.31% today.
Dim Sum bonds of Chinese banks with one-year maturity were indicated at around 6%, while those of top-rated PRC state-owned companies, also of one-year maturity, were indicated at around 10%, according to a syndicate banker in Hong Kong.
"It appears that the PBoC has scarified the CNH market for a stable renminbi, " said the credit trader.
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