Reply #25: Emerging debt-Asian financials rattled by bond insurers' woes [View All]

[Ghost Dog]

HONG KONG, Jan 31 (Reuters) - Asian bonds slid on Thursday as ratings agencies dealt multiple blows to U.S. bond insurers that triggered selling in financial institution credits.

Fitch Ratings downgraded FGIC Corp's bond insurance arm's top "AAA" rating to "AA", and Standard & Poor's said it cut or may cut ratings for hundreds of billions of dollars of U.S. mortgage-backed securities and collateralized debt obligations.

These downgrades overshadowed the U.S. Federal Reserve's decision to lower its main interest rate by 50 basis points to 3.0 percent.

The widely followed iTRAXX Asia ex-Japan high-yield index <ITAHY5UA=ITX> -- an important indicator of risk aversion -- moved out by 15 basis points (bps) to 495/505 bps as investors sold bonds from banks and other financial institutions.

"It certainly does take the shine off the 50 bps cut from last night," said Anthony Michael, Singapore-based head of fixed income at Aberdeen Asset Management.

"The big issue for the credit markets for the next couple of weeks is what happens to these monoliners and whether we will see further downgrades," he said.

/... http://www.reuters.com/article/marketsNews/idCNTHKG2515820080131?rpc=611