ASIA CREDIT CLOSE: Bank of China bonds rally in soft markets

SINGAPORE, June 25 (IFR) - Asian financial markets were on the defensive today amid prevailing jitters over the Greek debt issue as equities across the region headed one way - down.

The Nikkei ended 0.4% lower, while stock markets still open in Hong Kong and China were also in the red.

A steady, albeit dull opening in the European markets helped Asian credit spreads recoup some losses from a 2bp widening in the early afternoon.

The iTraxx Asia IG index was seen at 107bp/109bp, 0.5bp out from yesterday's close.

"The market is a touch softer and in a defensive mode," said one trader. "There's a bit of profit-taking and Greek headlines will continue to drive the markets."

In the cash bonds segment, much of the activity was focussed on Bank of China's landmark 5-tranche multi-currency offering.

The three US dollar tranches tightened, with the 2025s firming about 5bp to 152bp over US Treasuries, the 2020s indicated at 123bp and the 2018s at 142bp over 2-year US Treasuries.

Singtel's newly issued 2025s tightened to a mid-spread of 96.5bp, 1bp tighter than reoffer level.

In the high-yield segment, S&P said it had discontinued its corporate credit rating of D on Kaisa Group Holdings, citing a lack of sufficient and timely information to assess the property company's credit quality.

The bonds were just a tad softer with the 2019s indicated at around 59 on the bid side.

"There's not a lot of trading going on in the bonds," said Charles Macgregor, head of Asia for Lucror Analytics. "That, to me, indicates that bondholders are keen to see things through to the end of the restructuring."

Kaisa, which missed interest payments on two of its senior notes in March this year, is in talks with onshore and offshore creditors on debt restructuring.

kityin.boey@thomsonreuters.com