Unsuprisingly with the United States out today for the Martin Luther King holiday, Asia's credit markets had something of a subdued trading session. The supply overhang continues to be a technical drag and the Street is net long paper, although a Singapore-based credit trader said that he was surprised at the speed with which the supply glut has been absorbed.
The tone remains bullish on the back of a potential deal on the US debt ceiling and improving US fundamentals although there remain nerves about the chances of inflationary pressure emanating from Japan's plan to target 2 percent inflation and the country's ongoing asset purchase programme.
For the day, the iTraxx IG index is unchanged at 106bp/108bp, with little going through, either on the outright or hedged sides. The trader suggested that the market is hungry for FIG issuance, either at the senior or bank capital level and that it would fly through the door, but that Asia's well-capitalised banks are unlikely to provide the supply investors are hoping to see.
Meanwhile sovereign spreads continue their drift wider, with the sector around 15bp-20bp wider since the start of the year, led by the Indonesia cash curve.
On the day, both the Philippines and Indonesia cash curves are off a quarter point, with offshore selling outweighing local buying, although the latter remains a key technical support for the sovereign sector in both countries.
The recently issued Thai Oil 10s/30s combo remained well supported today although at a plus 177bp/172bp and plus 190bp/185bp two-way respectively, the market's illiquidity is obvious, with the touch on just a 3bp bid/offer spread last Friday rather than today's 5bp.