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Top credits are having to work harder to win support from the Asian investor base as borrowers further down the credit line are beginning to muscle in on the SSA's patch.

Asian issuers have not fully tapped the potentially vast fixed income investor base in the region. In fact, their sparse supply is the main reason that foreign issuers have been able to fill the space — and fill their boots in the process. Nick Parsons reports.-

With the five largest Asian central banks now controlling over 40% of the world's currency reserves they have become the key investors for sovereign, supranational and agency deals. Nick Parsons talks to members of the Asian DCM and syndicate community and finds out what other types of deals these investors are developing a taste for.

When Mexico's state oil company Pemex sold the first of what turned out to be a string of perpetual non-call five year bonds to Asian retail investors in autumn 2004, some bankers saw it as a deal that brought a whole new investor base to emerging market debt. They were right. But the more farsighted among them also realised demand could vanish just as quickly, and in May it happened, after the leap in US Treasury rates. Caren Chesler investigates if the market is likely to reopen any time soon.

The Asian investor base has never been more important for the European covered bond market. Not only is an ever-broader range of countries buying the paper but the variety of accounts is also expanding. The next step, says Neil Day, is for Asian investors to start diversifying out of public sector covered bonds into mortgage backed paper.

The Turkish Monetary Policy Board has increased interest rates by 1.75% to 15%, the first such increase in the last five years, following the publication of higher-than-expected inflation figures for May. The increase also comes as the current account deficit has reached a record $12.7 billion, a 45% increase over the same period last year. There has been strong volatility in the Turkish markets for the last three weeks with the Turkish lira depreciating by about 17% against the dollar and euro.

Two equity derivative flow traders, Silvan Herriger and Joergen Jaehnig, have left Deutsche Bank in London. Herriger, an index trader who also previously worked at JPMorgan, is thought to be headed to a hedge fund. Jaehnig, a single stock trader who previously worked at Citigroup, is reportedly set to join another firm in the City. Both were on gardening leave and could not be reached for comment.

The International Swaps and Derivatives Association is planning tomorrow to publish a template for trading credit-default swaps on tranches of collateralized debt obligations. Louise Marshall, spokeswoman, said the final version being released incorporates minor changes from member feedback (DW, 5/26).

The Royal Bank of Scotland has boosted its Japanese fixed income business with two senior hires in new positions.

Implied volatilities on the iTraxx indices are closing in after mushrooming almost 20% in the past month, but the sharp moves in vols have failed to attract players into credit options. The rise in vols across the indices should have been a good opportunity for options playing, traders said, but a lack of liquidity held people back and continues to be a problem which dogs the market (DW, 3/31). "People can't take long-dated positions," noted one trading official. "They wanted to trade in and out every day and you just can't do that with credit options."

Local currency securitisation has taken hold in Asia. As cross-border issuance languishes, demand from local investors has grown, and the domestic markets in countries like Malaysia and Taiwan have grown. And with the economic powerhouse of China setting out on the road to securitisation last year, the region's prospects are bright. Sarfraz Thind reports.