HONG KONG — Asian bond spreads widened to record levels yesterday as fears about a balance of payments crisis in Pakistan and Argentina’s takeover of its private pension system rocked confidence in broader emerging markets.
Fears about Asian companies also deepened after S&P and Moody’s downgraded ratings on Chinese conglomerate CITIC Pacific , which this week revealed a potential $2 billion loss on unauthorized currency trades.
"There’s a scare going on in emerging markets overall. Yesterday there were jitters about Pakistan, and right now, adding to the pressure is the news from Argentina," said a Manila-based bond trader.
The iTRAXX investment-grade index widened by by about 40 basis points (bps) to 380.
The equivalent high-yield index jumped some 100 bps to as high as 1,200.
Both marked new records levels, a Hong Kong-based trader said.
The steep widening comes amid concerns about the deteriorating health of emerging markets. Pakistan is feared to be in critical condition as the central bank holds barely enough foreign currency to cover six weeks of imports and was expected to seek IMF help.
Shaukat Tarin, economic adviser to the prime minister of Pakistan, told Dawn News on Tuesday that the country required up to $15 billion of support from foreign lenders to avert a crisis.
Also on Tuesday, news that Argentina will take over its $30 billion private pension system in order to guarantee payments to retirees sent the country’s stocks and bonds tumbling.
For more on this article, please click on the following link: Bond spreads hit record high: bworldonline
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