Emerging debt-Asian bond spreads widen; no relief in sight

HONG KONG, Aug 21 (Reuters) - Asian bond spreads widened on Thursday for a third consecutive session, tracking declines in regional stock markets amid continued concerns over the financial sector and slowing global economic growth.

Spreads also inched wider following a rebound in oil prices on the back of geopolitical tensions involving Russia and a Goldman Sachs reiteration of its prediction that crude will hit a record $149 a barrel by the end of the year. [ID:nLK476241]

Traders warned any rallies in the Asian credit markets were unlikely in the near-term given that a raft of new supply in the region was expected to lead to a re-pricing in levels.

"We are definitely in a path where things look weak and will continue to get weaker," said a Hong Kong-based trader.

"I can't see cash bonds rallying too much. Any decent rally that we could have will be tempered by worries there will be new supply," he added.

The iTRAXX Asia ex-Japan high-yield index ITAHY5YIA=, a key measure of risk aversion, widened by several basis points (bps) to 560, while the equivalent investment-grade index ITAIG5YIA= moved out by 1-2 bps to 155.

Though those levels are well below the records seen in mid-March in the run-up to the rescue of Bear Stearns, they are still more than double than the beginning of the year.

Investors still remain concerned about possible recessions in the United States and Japan, while financial firms from Lehman Brothers LEH.N to Freddie Mac (FRE.N: Quote, Profile, Research) continue to be hobbled by the prospect of losses and the need for more capital.

Oil prices CLc1 were again up 93 cents to $116.49 as of 0510 GMT, after a recent slump that saw crude prices recently fall further below a record above $147 barrel hit in mid-July.