* Credit spreads tighten modestly on rescue plans for banks
* 10-yr US Treasury yield at two-month high
* U.S. to inject $250 bln in big banks - sources
(Updates prices, adds quotes and comments)
By Kevin Plumberg
HONG KONG, Oct 14 (Reuters) - Asian stocks surged, with
Japan's Nikkei up more than 13 percent on Tuesday after
governments around the world readied plans to take stakes in
banks to keep the global financial system from collapsing.
The yen fell broadly and the yield on the 10-year U.S.
Treasury note hit a two-month high as investors ditched
low-risk investments to scoop up heavily oversold shares as
policymakers staged their biggest and most coordinated effort
yet to kickstart lending markets and ease credit strains.
Fears of a looming global recession were not dead, but for
now the sweeping emergency steps being enacted by governments
reduced the risk of financial system failure.
"It seems the tide has turned and a complete meltdown of
markets and a depression have been avoided. Investors can now
re-focus on fundamentals rather than the degree of panic in the
market," said Dariusz Kowalczyk, chief investment strategist
with CFC Seymour in Hong Kong, in a note.
After plunging 24 percent last week, Japan's Nikkei share
average soared 13 percent <> on Tuesday following a
holiday on Monday.
The MSCI index of other Asia-Pacific stocks <.MIAPJ0000PUS>
climbed 6.6 percent after hitting the lowest since December
2004 on Friday.
Australia's S&P/ASX 200 <> rose 4.5 percent after
posting its biggest daily gain since October 1997 on Monday.
Hong Kong's Hang Seng index <> rose 4.2 percent, a day
after rising 10.2 percent for the biggest single-day rise in 9
months.
The Dow Jones industrial average <> and the S&P 500
index <.SPX> of U.S. stocks posted record gains overnight,
jumping more than 11 percent. Global stocks added $1.7 trillion
in market value, the biggest single-day increase since the
financial crisis began 14 months ago, according to MSCI.
"We're seeing a wave of short-covering here, but it's hard
to see how far the rebound will go," said Masayoshi Okamoto,
head of dealing at Jujiya Securities in Tokyo.
The U.S. government agreed on Monday to take $25 billion
stakes in several big banks in a bid to shore up the banking
system and arrest the financial crisis, sources familiar with
the situation said. The move follows pledges by the governments
of Britain, Germany, France and other European countries of
more than 1 trillion euros ($1.36 trillion) to bolster their
own banks. []
Money markets showed initial signs of life. London
interbank offered rates (Libor), the benchmark for corporate,
financial and household borrowing, eased in sterling, euros and
U.S. dollars.
The spread of 3-month Libor over the 3-month U.S. Treasury
yield narrowed modestly to 451 basis points from 459 basis
points on Friday.
"Capital markets roar approval of the synchronized
recapitalisation and guaranteed programmes," said Brett
Williams, credit analyst with BNP Paribas in Hong Kong. "New
U.S. government initiatives rolling out this morning, in
parallel with those adopted by European jurisdictions
yesterday, could further underpin positive sentiment," he said
in a note.
Government bonds were hard hit.
The benchmark 10-year U.S. Treasury note <US10YT=RR> fell
more than a full point in price, pushing the yield up to a
2-month high of 4.09 percent from 3.88 percent late on Friday
in New York. U.S. bond markets were closed on Monday for a
holiday but stock markets traded.
The difference between the 10-year yield and the 2-year
yield, referred to as their yield curve, narrowed by 17 basis
points, as investors essentially reduced bets on an aggressive
interest rate cut by the Federal Reserve this month.
The benchmark 10-year Japanese government bond yield
<JP10YTN=JBTC> hit a three-month high of 1.630 percent.
The euro rallied 1.3 percent from late U.S. trading on
Monday to 140.34 yen <EURJPY=R>, having rebounded off a
three-year low of 132.15 yen hit on trading platform EBS on
Friday.
The U.S. dollar climbed 0.8 percent from late New York to
102.80 yen <JPY=>, having come off a six-month low of 97.91 yen
hit on Friday.
Gold rose 1.7 percent to $845.35 an ounce <XAU=> as rising
oil prices boosted its appeal as a hedge against inflation, but
the rally in stock markets could also cap gains. It had dropped
to $821 an ounce on Monday, its weakest since Oct. 3.
U.S. crude oil futures <CLc1> rose more than 4 percent
overnight and another 2.5 percent in early trade on Tuesday on
hopes the financial crisis may ease. Light sweet crude futures
were trading around $83.20 a barrel. []
(Additional reporting by Elaine Lies in TOKYO; Editing by
Lincoln Feast)
