Asian bond spreads were flat on Thursday ahead of the release of the "stress tests" on US banks, but sentiment was weak amid a worsening global economic outlook. US regulators will brief banks as early as Friday on how they performed in the tests, designed to see how the country's top lenders would fare should recession become more severe, before the results were made public later.
The International Monetary Fund said the global economy would likely contract 1.3 percent this year, reversing its earlier forecast of a 0.5 percent growth, as financial markets may take longer to stabilise. Adding to the gloom, Morgan Stanley posted a wider-than-expected quarterly loss, as real estate investment losses and debt-related charge wiped out strong trading and banking fees.
The Asia iTraxx investment-grade index excluding Japan held up at 320/325 basis points, Hong Kong-based traders said. The MSCI index of Asia-Pacific stocks outside Japan was up 0.3 percent as of 0314 GMT. The following were the major movers in cash bonds and credit default swaps (CDS):
China's five-year CDS was flat at 140/160 bps, as a central bank adviser reiterated on Thursday that the economy has reached its bottom and may expand 7 to 8 percent this year. South Korea's five-year CDS widened to 295/315 bps from 285/295 on caution ahead of the release of the country's first-quarter economic data on Friday, traders said.
Philippines' cash bonds fell after the government said it would borrow more from overseas to plug a wider budget deficit, a Manila-based trader said.The country's 8.375 percent bond due in 2019 traded at 110.125/110.625 from 110.75/111.00. The country's five-year CDS was range-bound at 315/330 bps.
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