Asian debt spreads narrowed on Tuesday, with the region's bonds lifted by rising expectations that the worst of the global downturn may be over after Japan raised its economic outlook for the first time in three years. Tokyo said the pace of decline in the world's No 2 economy was slowing as exports and industrial output were nearing bottom.
A survey showing that Germany's business sentiment rose for a second month in May offered another encouraging sign. Unlike safe-haven US or Japanese government debt, most Asian bonds are seen as riskier assets that benefit from improved risk appetite.
"It's the same theme in Asian credits for the past few weeks. There is continued demand. A lot of people have been waiting for too long to put their money to work and most believe that Asian economies will recover faster than the US and Europe," an analyst said.
The Asia Itraxx investment-grade index excluding Japan narrowed for a second straight session to 175/185 basis points from 180/190 on Monday, a Hong Kong-based trader said. Since the start of the month, the index has tightened 100 bps to its lowest since October. The MSCI index of Asia-Pacific stocks outside Japan was down 0.2 percent as of 0333 GMT. The following were the major movers in cash bonds and credit default swaps (CDS):
Philippines' cash bonds gained, with the country's 8.375 percent bond due in 2019 trading at 116.00/116.25, up from 115.875/116.125, a Manila-based trader said. The nation's five-year CDS tightened slightly to 208/218 bps from 210/220. South Korea's five-year CDS narrowed by 5 bps to 130/145 bps, as investors largely ignored the tension between the South and North Korea, traders said.
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