Asian bond spreads were flat in a listless session on Friday, with investors keeping to the sidelines ahead of US jobs data later in the day, while waiting for possible new issuance from Indonesia. "There is no particular trend at the moment," said Tim Condon, chief economist at ING Financial Markets.
"It is very difficult to form a firm consensus at this point on where the market is headed." The Asia iTraxx investment-grade index excluding Japan, a key measure of risk aversion, was range-bound at 345/355 basis points, traders said. Malaysia's five-year credit default swaps (CDS) narrowed 15 basis points to 235/245, a trader said, as the government said it will discuss plans for a second fiscal package to stimulate domestic demand following an initial $2 billion spending plan.
Indonesia's five-year CDS - or insurance-like contracts that protect investors against defaults or restructuring - were range-bound at 585/595 basis points, a trader said. Bond traders expect Indonesia to issue global bonds in the next few days to help fund a bigger budget deficit this year as it expands spending to fight the global financial crisis ahead of elections.
"Financial markets will be trading on a range and will be news-driven in the coming days," Condon said. Investors will also be waiting for any progress on the US president's $900 billion stimulus plan that is being debated in Congress, he added.
Obama has warned that the US economy would face a "catastrophe" without his stimulus bill that aims to cut taxes and increase spending, as he prodded Congress to act quickly on the legislation. The next major trade trigger for markets will be the US comprehensive jobs report for January, which is expected to show later on Friday that the economy shed 525,000 jobs.