Asian bonds prices fell and the cost of insuring debt across the region rose as investor sentiment was slammed by the deepening credit crisis that has sent financial firms scrambling to find buyers.
Benchmark indices hit new highs as central banks continued dishing out funds to prevent banks from hoarding cash as the US government's $85 billion bailout of insurance giant American International Group failed to calm markets.
The iTRAXX Asia ex-Japan high-yield index, a key measure of risk aversion, moved out to 730/750 basis points (bps) from 700/711.50 bps. The equivalent investment-grade index moved out to 243 bps from 216.5/225.25. "Institutional failures have and will, we expect, still dominate headlines in coming weeks," said Brett Williams, BNP credit analyst in a client note.
Even as the crisis of liquidity and confidence deepened, potential takeovers lurked for No 2 US investment bank Morgan Stanley, weakened top US savings bank Washington Mutual and major UK mortgage lender HBOS. Panic reigns in the investor community even after central banks pumped additional cash into money markets to prevent banks hoarding cash amid an environment of distrust and uncertainty.
Bonds from Philippines, one of the region's most active issuers, due in 2031 were quoted at 105.50/108 cents to a dollar, while debt due in 2032 traded at 93/94.50, both down by more than a point. Philippine 5-year credit default swaps (CDS) moved out to 310/330 bps from 285 bps.
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