Asian bonds fell on Monday, extending last week's weakness on growing signs of an imminent US recession after data showed the world's largest economy shed jobs in February at its fastest rate in nearly 5 years.
Malaysian credit default swaps (CDS) received an additional setback after the ruling coalition party suffered its heaviest poll setback in its 50-year reign on Saturday in a stunning election result.
Five-year CDS - insurance-like contracts that protect against debt defaults and restructuring - were already under pressure after an exchangeable Islamic bond sale by Malaysian state investment arm Khazanah had investors scrambling to buy protection.
"There is selling across the board. Right now everything is under pressure," said a Hong Kong-based trader. The iTRAXX Asia ex-Japan high-yield index - an important measure of risk aversion - blew out to a new all-time high of 634 basis points (bps), from Friday's close of 594/605 bps ahead of the US jobs data.
Moody's Investors Service changed to negative from positive the outlook for PT Ciliandra Perkasa's (Ciliandra) B2 corporate family rating and secured rating on its US $160 million notes late on Friday.
Malaysian sovereign CDS were quoted at 113/118 bps, 10-15 bps wider after Saturday's election results led to calls for Prime Minister Abdullah Ahmad Badawi to quit. Last week, Malaysian state investment arm Khazanah Nasional raised $550 million via the sale of a 5-year exchangeable sukuk. That had pushed its CDS to 94 bps from 88 bps as investors bought protection to reduce credit risk on the sukuks.
South Korean CDS was also active. The 5-year contract moved out to 98 bps from 91 bps. Philippine bonds, among the most active in the region, were steady but its CDS widened. Philippine bonds due in 2032 were quoted at 95.875/96.125 cents to a dollar and 2031 bonds were steady at 109.75/110.25. Its 5-year CDS were traded at 264 bps compared with Friday's 255 bps.