Asian bonds held broadly steady on Thursday ahead of key US jobs data, and the mood remained edgy despite a stocks rally as investors feared more credit-related losses.
Overnight, there was some disappointment over a plan to shore up the No 2 bond insurer's balance sheet as Ambac Financial Group Inc said it would sell at least $1.5 billion of stock and equity-linked securities to help boost capital. Analysts said the cash would not be enough to stabilise the company's credit-worthiness in the long run.
Meanwhile, Chong Hing Bank, a small Hong Kong lender, booked a loss of HK$369.6 million ($47.3 million) on its holdings in structured investment vehicles, one of the complex instruments at the centre of the credit market meltdown. Its shares fell 1 percent while the bank's 2016 bonds were not traded on Thursday, with one dealer saying it was an illiquid security which was "locked away" by investors.
"Contagion from structured investment products losses is global and will, we reckon, remain chronic through the fourth quarter of 2008," said Brett Williams, a credit analyst with BNP Paribas. The iTRAXX Asia ex-Japan high-yield index - an important measure of risk aversion - was trading at 585 basis points (bps), compared to Wednesday's close of 582/594 bps.
Philippine bonds, among the most active in the region, were steady to slightly weaker with many investors also keeping an eye on local politics. Philippine bonds due in 2032 were stable at 96.50/96.875 cents to a dollar and 2031 bonds dipped to 110.375/110.625 from 110.5/110.75. Its five-year credit default swaps (CDS) - or insurance-like contracts that protect against defaults or restructuring - were steady at 236/240 basis points.