Credit markets keep reeling despite ECB's €750 billion bond-buying programme

The scheme will also include debt from Greece, which has so far been shut out of ECB bond purchases due to its low credit rating. PHOTO: REUTERS

FRANKFURT (BLOOMBERG) - The worst rout in credit since the global financial crisis deepened in Asia despite the European Central Bank launching massive extra emergency stimulus just hours earlier.

In a sign of the daunting challenges authorities face as the coronavirus pandemic fuels a stunning surge in financing costs, spreads on even the safest corporate bonds in dollars in Asia blew out the most in seven years. The price of insuring against default in the region jumped to the highest since 2016.

"Liquidity in the credit market has frozen up," said Clement Chong, head of research at NN Investment Partners. "The focus now should be on liquidity of issuers given the level of economic activities that have come to a standstill."

Policy makers are trying to prevent a chain reaction of defaults, as the pandemic prompts unprecedented lockdowns, travel bans and supply chain disruption. The ECB announced an asset purchase program to buy public and private-sector securities, worth 750 billion euros (S$1.19 trillion). South Korea extended more support to small companies, and will implement contingency plans to stabilize the corporate bond market if needed. India's central bank stands ready to take more steps to contain yields.

Primary issuance markets around the world are grinding to a halt, limiting access to cash when strained companies need it most. Chinese property developers, the biggest junk bond issuers in Asia, are at growing risk of default as the crisis squeezes funding channels, according to PricewaterhouseCoopers.

The pandemic brought more grim headlines, with Europe surpassing China in the number of confirmed cases and deaths from the disease. Investors and analysts don't see confidence returning to credit markets until there are signs of stabilization in the outbreak outside China, pointing to the limits of stimulus to revive economic activity in the face of health fears.


Asia investment-grade dollar bond spreads were about 20 basis points wider on Thursday morning, according to traders. That put them on course for the worst-blow out since 2013, according to a Bloomberg Barclays Index

Beijing Capital Airlines said trading of two of its assets-backed securities has been suspended from Thursday as ticket revenues have been hurt by the pandemic

The Markit iTraxx Asia ex-Japan index of credit-default swaps was indicated about 10 basis points wider, and the Markit iTraxx Australia 20 basis points out, according to traders


Some credit-default swaps are approaching financial crisis levels. That kept borrowers at bay on Wednesday, a stark contrast to Tuesday's onslaught

Investment-grade bond spreads rose 30 basis points to 285 basis points, the widest level since July 2009, while high yield widened 58 basis points to 904 basis points

Mallinckrodt failed to line up funding for a loan deal designed to ease its debt load and help settle massive legal claims


France is letting banks tap buffers to keep credit flowing

Italy's Prime Minister Giuseppe Conte has proposed joint EU debt issuance, with German chancellor Angela Merkel saying she's happy for her finance chief to explore the proposal with other minister

The doors to Europe's primary bond market slammed shut again on Wednesday. Sales will only resume once virus-fueled volatility comes to an end, according to market participants interviewed by Bloomberg News, yet they have no idea when this might be

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