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Emerging debt-Asian spread widen amid global economy fears

By Rafael Nam

HONG KONG, Nov 6 (Reuters) - Asian bond spreads widened on Thursday, ending a seven-session rally in credit markets, after grim U.S. economic data reinforced fears that the global economy may be slipping into a deep and prolonged recession.

The U.S. private sector jobs market deteriorated rapidly in October, data on Wednesday showed, while the service sector contracted sharply, putting on display the stark challenges facing Barack Obama, the next U.S. president.

Despite a recent rally seen in global markets, trading volumes for Asian corporate and sovereign debt have remained low, in an indication of continued risk aversion.

"Euphoria over regime change in America was granted only a brief, luminous moment from an inspirational message from Chicago before market participants returned to face a fast-deteriorating economic and financial landscape," wrote Brett Williams, a credit analyst at BNP Paribas, referring to the city where Obama lives.

The iTRAXX investment-grade index, a key measure of risk aversion, widened to as much as 400 basis points (bps) before tightening to 375. The index was trading at 310 during Asian trade on Wednesday and had widened to 360 during New York trade, according to a Hong Kong-based dealer.

The iTRAXX high yield index widened to 1,150 bps, compared to 920 bps in Asian trade on Wednesday.

Policy makers worldwide have responded to the prospect of a global recession by slashing interest rates, injecting liquidity and, at times, stepping in to rescue troubled lenders.

Both the European Central Bank and the Bank of England are expected to ease monetary policy at meetings later in the day. and

Though those moves lifted markets last week, they have yet to fully convince investors that the worst is behind, according to analysts.

Sovereign debt spreads, which have remained the most active segment of the market in recent weeks, widened across the board.

South Korea's five-year credit default swaps, or insurance-like contracts that protect against defaults or restructuring, widened by 20 basis points to 300 bps.

The country's central bank meets on Friday, and economists expect it to ease interest rates by 25 basis points, which would come on top of a 75 bps cut made last week during an emergency meeting.

Indonesia's five-year CDS widened to 610 from its 550 bps close on Wednesday, ahead of a central bank meeting later in the day, although no changes to interest rates are expected given the country's efforts to shore up the rupiah.

Southeast Asia's largest economy has seen spreads recently hit records above 1,200 bps amid concerns about its current account deficit and its reliance on overseas borrowing.

FIVE-YEAR CREDIT DEFAULT SWAPS

Bid/Ask spread

Current Week ago

Korea Dev Bank 355/~ 690/~

Hutchison 300/~ 520/~

PCCW-HKT 400/700 750/~

China ~/190 ~/250

Indonesia ~/780 700/845

Korea 300/400 ~/500

Malaysia 200/270 ~/360

Philippines ~/480 ~/550

~ no bid or ask spread

For CDS prices double click on

ASIAN BENCHMARK DOLLAR BONDS

Coupon Maturity Bid price Bid spread

5-YEAR

------

DBS Bank 7.13 15-May-11 93.05 783

Malaysia 7.50 15-Jul-11 107.63 197

ICICI Bank 5.75 12-Jan-12 68.93 167

Petronas 7.00 22-May-12 96.74 559

Hutchison 6.50 13-Feb-13 84.99 850

Chartered Semi 6.25 4-Apr-13 88.60 698

Korea 4.25 1-Jun-13 85.92 550

United Overseas 4.50 2-Jul-13 80.95 719

PCCW-HKT 6.00 15-Jul-13 101.18 324

China 4.75 29-Oct-13 99.52 237

10-YEAR

-------

Hutchison 6.25 24-Jan-14 73.81 671

Korea 4.88 22-Sep-14 84.28 462

PCCW-HKT 5.25 20-Jul-15 74.21 705

Woori Bank 6.13 3-May-16 80.51 622

Penerbangan 5.63 15-Mar-16 102.93 145

Philippines 8.75 7-Oct-16 103.00 453

Indonesia 6.88 9-Mar-17 80.00 684

ICICI Bank 6.38 30-Apr-22 53.16 1023

Petronas 7.88 22-May-22 96.00 468

(Editing by Kim Coghill)

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