Asian bond spreads tightened on Thursday as the US governments offer to help some US life insurers reinforces optimism that policymakers remain committed to tackling the worst global economic downturn in decades.
Still, a continued raft of weak data, including those showing Australias unemployment rate jumping by the most in 18 years and the Federal Reserves cutting of its US economic forecasts, kept spreads from tightening too much. Trading was thin ahead of holidays on Friday and Monday for large parts of Asia.
The Asia iTraxx investment-grade index excluding Japan narrowed by 5 basis points to 315/330, according to a Hong Kong-based trader. The iTraxx gauge is still slightly wider compared to last week, after worries about weak global corporate earnings dented investor demand earlier in the week.
A hefty supply of new offerings this week - a $1.5 billion debt sale from Hutchison Whampoa and a $3 billion two-tranche bond sale from South Korea - also pressured spreads. The MSCI index of Asia-Pacific stocks outside Japan rose 2 percent as of 0400 GMT. South Koreas newly-sold $1.5 billion bonds maturing in 2014 widened to 402 basis points over equivalent US Treasuries from the 400 points spreads at which they were sold.
However, the countrys $1.5 billion in bonds maturing in 2019 tightened to as much as 427 basis points over equivalent US Treasuries before widening to 430. The debt was sold at 437.5 basis points over Treasuries. Traders said the divergence between the two tranches was a result of the more attractive premiums for the 10-year note.
Investors also expect South Korean lenders armed with recently expanded terms for a government debt guarantee to come forward to sell global bonds at more attractive premiums than South Koreas. Indonesias five-year CDS was unchanged at 510/550 basis points, as investors showed little reaction to the countrys parliamentary elections.
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