Asian bond spreads narrowed on Thursday as Wall Street's gains overnight helped lift sentiment but the deteriorating economies of China and South Korea continued to worry investors. Purchases by the chief executives of Bank of America and J.P. Morgan Chase of some of their companies' stock and Apple's forecast-beating profit helped calm investors, who had been worried about more bank and other corporate results.
"There is a bit of confidence toward banks after their executives bought their shares, and on the corporate side, we have a stronger-than-expected result from Apple. These factors gave people a degree of confidence," said a credit analyst. The Asia iTraxx investment-grade index excluding Japan, a key measure of risk aversion, narrowed to about 328 basis points from as high as 345 on Wednesday, a trader said.
Credit spreads have widened by as much as 48 basis points in the previous two sessions, as concerns about more bank failures and rising fears of a prolonged global recession prompted investors to flee from riskier assets. Elsewhere, South Korea's five-year credit default swaps (CDS) - insurance-like contracts that protect investors against defaults or restructuring - widened to 381 basis points from as high as 355 on Wednesday on the gloomy outlook for Asia's fourth-largest economy.
China's five-year CDS was steady at 215 basis points, after Beijing announced the economy expanded at its slowest pace in seven years in 2008 despite a series of rate cuts and fiscal measures to support key industries.