Asian bond spreads were largely steady in cautious trade on Tuesday as investors assessed the economic impact of the swine flu disease, which could prolong a world-wide slowdown. "With the experience of Sars behind us, we are better prepared to deal with this problem," a bond analyst said.
"But the market is nevertheless concerned about it and how it could further hold back Asia's recovery from the downturn." By 0330 GMT, the Asia iTraxx investment-grade index excluding Japan, a key measure of risk aversion, was trading in a narrow range of 305/310 basis points, a Hong Kong-based trader said.
Investors were also hesitant to take more risks ahead of the first-quarter economic data in the United States due on Wednesday and the results of the Federal Reserve meeting on Thursday. The MSCI index of Asia-Pacific stocks outside Japan was down 0.7 percent after falling as much as 2.5 percent on Monday. So far, there have been no confirmed cases of infection from the swine flu virus in Asia.
The following were the major movers in cash bonds and credit default swaps (CDS): South Korea's five-year CDS were steady at 275/290 basis points as investors wait for the outcome of Kookmin Bank's meetings with investors this week for a possible bond sale.
Philippines' cash bonds fell for the second day in a row, on market worries over the country's deteriorating fiscal position, with the government eyeing more debt sales overseas to fund a bigger budget deficit. The country's 8.375 percent bond due in 2019 traded at 110.00/110.375 from 110.25/110.675, a Manila-based trader said. The country's five-year CDS widened to 315/330 bps from 305/315.