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Emerging debt-Asian spreads widen on credit fears

Published: 20 Apr 2009 19:52:37 PST

HONG KONG, April 21 - Asian bond spreads widened on Tuesday on renewed fears for the health of U.S. banks after Bank of America reported a rise in bad loans, suggesting the sector's troubles were far from over.

Bank of America said it set aside $13.38 billion for credit losses in the first quarter, up from $8.54 billion in the fourth quarter. The rise in the reserves for bad loans overshadowed its upbeat earnings results.

The Asia iTraxx investment-grade index excluding Japan widened to 315/330 basis points from 297/305 on Monday, a Hong Kong-based trader said.

Investors would remain cautious about taking risks ahead of the results of "stress tests" on 19 U.S. banks due around May 4, which will examine the banks' ability to survive a more severe downturn, traders said.

The MSCI index of Asia-Pacific stocks outside Japan was down 2.5 percent at 0300 GMT.

The following were the major movers in cash bonds and credit default swaps (CDS):

-- SOUTH KOREA'S five-year CDS widened to 290/310 bps from 270/290, tracking the performance of the broader market. The continued drop in the country's exports also dampened sentiment, traders said.

Industrial Bank of Korea's newly-issued 7.125 percent bonds due in 2014 widened to 584 bps from 552/562 over U.S. Treasuries, traders said. The bonds were issued last week at a spread of 556.6 bps.

-- PHILIPPINES' cash bonds fell for a second day, as investors pared holdings of risky assets. The country's 8.375 percent bond due in 2019 traded at 110.50/110.75 from 111.25/111.625, a Manila-based trader said

The country's five-year CDS widened to 310/335 bps from 290/320 on worries about more debt sales, he said.

Manila may consider going back to the overseas debt market later this year to raise funds to plug a wider budget deficit.

FIVE-YEAR CREDIT DEFAULT SWAPS

Bid/Ask spread

Current Week ago Korea Dev Bank 343.720* 375.00* Hutchison 225/245 230/240 PCCW-HKT 350.00* 400.00* China 140/155 130/145 Indonesia 465/475 490/530 Korea 290/315 275/295 Malaysia 200/215 ~/205 Philippines 315/335 ~/330 ~ no bid or ask spread * midspread

ASIAN BENCHMARK DOLLAR BONDS

Coupon Maturity Bid price Bid spread

5-YEAR

------

DBS Bank 7.13 15-May-11 105.35 260

Malaysia 7.50 15-Jul-11 109.23 140

ICICI Bank 5.75 12-Jan-12 91.00 778

Petronas 7.00 22-May-12 108.87 213

Hutchison 6.50 13-Feb-13 101.80 417

Chartered Semi 6.25 4-Apr-13 70.28 150

Korea 4.25 1-Jun-13 96.75 334

United Overseas 4.50 2-Jul-13 98.50 311