Thai CDS near one-year high as violence flares

The cost of insuring Thailand's debt against default jumped on Friday to hover near its highest in a year as violence flared in Bangkok following overnight fighting that killed one person and wounded 11. Thailand's five-year credit default swaps (CDS) rose more than 30 basis points (bps) to 142 bps.
It marked the biggest percentage jump in nine months but still left the contract short of last Friday's one-year high of 147, posted at the height of global market fears over the euro area debt crisis. Indeed, the CDS was also much lower than a record 455 bps reached in October 2008 after the collapse of Lehman Brothers. Thailand underperformed the broad iTraxx SovX Asia Pacific index, which tracks the five-year sovereign CDS of 10 countries in the region. The index last traded at 120/122 bps, 7 bps off Thursday's levels, traders said.
"Generally, the markets are a little bit more nervous after last week's concerns about Europe, but domestic factors are the most important factor for the recent widening in Thailand," said Rajeev de Mello, head of Asian investment at Western Asset Management in Singapore.
Bonds sold by state-owned Korea Resources Corp gained on their Asian debut on Friday, outperforming a weak broader market hit by concerns spending cuts in Europe will slow the region's economic recovery. Korea Resources, the first quasi-sovereign corporate issuer from the country this year, sold $300 million of five-year bonds on Thursday at 197.5 basis points (bps) over US Treasuries. The bonds were traded at 190 bps, traders said.
The deal attracted $2.6 billion in orders, a source said on Friday. Investors in Asia took 73 percent of debt and Europe the rest. The broad Asia ex-Japan iTraxx investment-grade index last traded at 116/118, 16 bps wider from the previous session, traders said. But it was still below the 10-month high of 150 seen last Friday. Since the start of the year, the index has swelled by 22.5 bps. The high-yield bonds were traded as low as 98/98.50 cents on the dollar, versus its issue price of 99.08.