Asian bond spreads narrowed on Friday, capping a volatile week on an upbeat tone, helped by gains in US stocks and improving outlook on the Chinese and South Korean economies. Stocks on Wall Street jumped overnight as better-than-expected earnings from several regional banks lifted financial shares.
US Treasury Secretary Timothy Geithner said the global economy has shown signs that the worst of the downturn may be easing in recent weeks, as conditions in some financial markets have improved. The Asia iTraxx investment-grade index excluding Japan tightened to 305/310 basis points from 320/325 on Thursday, a Hong Kong-based trader said.
Gains were capped as investors braced for the results of "stress tests" on top US banks to determine if the lenders were adequately capitalised to withstand a deeper recession. The MSCI index of Asia-Pacific stocks outside Japan was up 0.7 percent as of 0323 GMT. The following were the major movers in cash bonds and credit default swaps (CDS):
China's five-year CDS narrowed to 130/140 bps from 140/160, after a leading government economist said growth will improve in the second quarter. A central bank adviser on Thursday also expressed similar upbeat views and reiterated that the economy has reached its bottom and may expand 7 to 8 percent this year.
South Korea's five-year CDS tightened to 275/295 bps from 295/315, lifted by data showing that the economy averted a recession and expanded by a seasonally adjusted 0.1 percent in the first quarter from the fourth.
Philippines' cash bonds rebounded after a sell-off in the previous session as a wider first-quarter budget deficit and more debt sales plans spooked investors. The country's 8.375 percent bond due in 2019 traded at 110.375/110.625 from 110.125/110.625, a Manila-based trader said. The country's five-year CDS narrowed to 310/320 bps from 315/330.