Asian bond spreads widened for a second straight day on Tuesday, as investors pocketed gains after a recent rally, while others were sidelined ahead of the release of key US economic data. The Asia Itraxx investment-grade index excluding Japan widened to 225/235 basis points from 210/220 on Monday, a Hong Kong-based trader said.
The MSCI index of Asia-Pacific stocks outside Japan was down 1.0 percent as of 0303 GMT. Asian debt gained sharply last week, with the Itraxx index posting its best performance in seven months on hopes that the worst of the global downturn maybe over. "It's reasonable to expect some profit taking.
The rally was a bit overdone and the market was begging for a correction," a Hong Kong-based analyst said. "But overall, the mood has changed in recent months. Last year, it was completely bearish. This year...it's no longer good to hold on to cash. It's time to put cash to work."
The following were the major movers in cash bonds and credit default swaps (CDS): China's five-year CDS widened by 10 bps to 95/105, as investors were wary about the strength of the country's recovery as underscored by data showing that the pace of decline in exports accelerated in April, while deflation deepened.
South Korea's five-year CDS widened to 180/185 bps from 175/180, tracking losses in the broader market. The country's central bank on Tuesday kept its rate steady for a third month and said inflation would drop sharply in the current month and stay low for several months.
Philippines' cash bonds dropped for a third straight session as investors took profits after hitting record highs last week, a Manila-based trader said. The country's 8.375 percent bond due in 2019 traded at 114.50/115.00 from 115.00/115.25. The bond rose to 116.00 on Thursday, the highest since the debt was sold in January.
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