Asian debt spreads widened to the highest in more than a week on Wednesday, as risk aversion ruled the market after Germany banned naked short selling of bonds, credit default swaps and shares. Asian sovereign CDS widened across the board, while bond prices dipped, as investors feared other countries in Europe may follow Germany's lead.
Bonds from Chinese developers weakened on concerns Beijing may impose taxes on property in a continuing effort to cool real estate prices. The Asia ex-Japan iTraxx investment-grade index widened 10 basis points (bps) to 133/135, traders said, the highest since May 7. The Thomson Reuters Index of Asia emerging credit was quoted at 148.10 on a simple average basis, versus 133.90 the previous day.
"From the overall market perspective, it (Germany's move) is a source of uncertainty. Whether there will be additional policy measures is a major question, and the subsequent uncertainty is leading to the volatility in spreads," said Yang-Myung Hong, credit analyst at Nomura in Hong Kong. In naked short selling, a trader sells a financial instrument short, Thailand's five-year CDS widened 8 bps to 155/165, as the government launched an offensive to evict anti-government protesters from their camp in Bangkok.
The Thai CDS though has eased from a one-year high of 165/175 bps posted on May 17. The iTraxx SovX Asia Pacific index, which tracks the five-year sovereign CDS of 10 countries in the region, also widened 7 bps to 139/141, traders said. Bonds from Chinese developers were being sold off, as fears Beijing may impose taxes on property to curb fast-rising prices weighed on sentiment, traders said. Country Garden's bonds due in 2017 fell to 89.5/90.5 cents on the dollar from 91.75/92.5.
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