Asian bond spreads tightened for a second session on Tuesday as the continued slump in oil prices eased concerns over inflation at a time of slowing global economic growth. The iTRAXX Asia ex-Japan high-yield index tightened by 7 basis points (bps) to 545, while the equivalent investment-grade index moved in by 2 bps to 141, a Hong Kong-based trader said.
"Spreads are tighter because of the US stock market gains overnight and the lower oil prices," said a Hong Kong-based trader, though he added volumes were low. Among outperformers, Malaysia's five-year credit default swaps (CDS), or insurance-like contracts that protect against defaults, tightened by 5 bps to 105 as investors saw a recent sharp widening in spreads as overdone.
Malaysia's spreads still trade 10 bps wider than South Korea's CDS, a sovereign credit to which it is often compared. The cost of protection for Malaysian debt has risen, given political instability following sodomy charges against leading opposition figure Anwar Ibrahim.