Asian bond spreads narrowed on Monday, spurred by easing investor fears over the health of US banks and optimism that the worlds biggest economy would recover in 2010, boosting the regions exports. "This is a reflection of the improving general investor sentiment. We are seeing a glimmer of hope from top US banks and the economy. Things have calmed down a bit," said David Cohen, director of Asian economic forecasting at Action Economics in Singapore.
Federal Reserve Chairman Ben Bernanke on Sunday said the US economy will recover beginning next year, while the chief executive of Citigroup last week said the lender did not need any more government aid. Citigroup also raised hopes it would return to profit this quarter. The Asia iTraxx investment-grade index excluding Japan, a key measure of risk aversion, narrowed to 410/430 basis points from 420/430 on Friday, a Hong Kong-based trader said.
The MSCI index of Asia-Pacific stocks outside Japan was up 1.2 percent at 0327 GMT. Indonesias five year CDS narrowed to 610/640 bps from 630/680 after the President Susilo Bambang Yudhoyono said the economy will expand 4.5 percent this year, more than the 4 percent central bank estimate. The nations 10.375 percent bonds maturing in 2014 rose to 102.75 from 102.25 on Friday, a trader said.
The bonds were issued last month at 99.475. South Koreas five year CDS narrowed to 400/415 from 400/420 bps, tracking gains in the broader market. The wons continued recovery versus the US dollar also helped lift sentiment, traders said.
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